According to witnesses, dozens of Jewish settlers attacked the town of Urif and clashed with local residents.
The Israeli army intervened shortly afterward, firing rubber bullets and teargas at Palestinian protesters.
At least one Palestinian was injured by the rubber bullets, while dozens of others suffered temporary asphyxiation after inhaling excessive teargas.
The developments came shortly after four Israelis were killed and seven others injured in an attack by two Palestinians on a Jewish synagogue in West Jerusalem. The two attackers were shot dead by Israeli police in the immediate wake of the attack.
The attackers were identified as cousins Ghassan and Oudai Abu Jamal from occupied East Jerusalem's Jabal al-Mukaber neighborhood.
No group has thus far claimed responsibility for the attack, which is the eighth to have occurred in Israel and the occupied territories within the last month.
Tension in the region had reignited when Israeli authorities closed off East Jerusalem's flashpoint Al-Asqa Mosque complex for hours following the injury of an extremist rabbi who was shot by a Palestinian man in west Jerusalem.
Following the shooting, Israeli troops killed the man in a raid on his East Jerusalem, igniting violent clashes between Israeli forces and Palestinian protesters.
For Muslims, Al-Aqsa represents the world's third holiest site. Jews, for their part, refer to the area as the "Temple Mount," claiming it was the site of two Jewish temples in ancient times.
Israel occupied East Jerusalem during the 1967 Middle East War. It later annexed the holy city in 1980, claiming it as the capital of the self-proclaimed Jewish state-a move never recognized by the international community.
In September 2000, a visit to Al-Aqsa by controversial Israeli politician Ariel Sharon triggered what later became known as the "Second Intifada," a popular uprising against Israel's decades-long occupation in which thousands of Palestinians were killed.
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