Israel stayed away from the UN forum's landmark foray into its conflict with the Palestinians on Monday, disputing the right of the court in The Hague to rule on the case.
Both Israelis and Palestinians tried to influence public opinion, staging demonstrations outside the court.
Israel says the barrier is just for security and cites a human bombing that killed eight people aboard a Jerusalem bus on Sunday as proof it needs it to keep out bombers.
Thousands of Palestinians in the West Bank and Gaza Strip held protests in a "Day of Rage" against what they call Israel's "apartheid wall", separating many of them from their fields, schools and medical services.
Israeli troops fired teargas and rubber-coated bullets at demonstrators who threw stones in protests that echoed the early days of a Palestinian uprising launched in 2000.
"This wall, if completed, will leave the Palestinian people with only half of the West Bank within isolated, non-contiguous, walled enclaves"
Palestinian UN representative
"This wall, if completed, will leave the Palestinian people with only half of the West Bank within isolated, non-contiguous, walled enclaves," Nasir al-Qidwa, the Palestinians' permanent observer to the United Nations, told the 15-judge panel.
And Palestinian President Yasir Arafat, in a televised address to his people, said there could be no peace or security with the barrier in place.
The Hague tribunal will hold three days of hearings on the legality of building a barrier in occupied territory.
At stake is not only an international ruling, but world opinion in a case that underlines the paralysis of Middle East peacemaking after more than three years of violence.
Despite Israel's decision not to speak at the hearing, a small team of government legal experts sat in as observers.
Daniel Taub, a Foreign Ministry lawyer who helped draft the position paper that Israel sent last month, called the hearing one-sided and stacked against Israel.
"We in the court felt absolutely no empathy toward the children, the more than 950 people, who have been killed in acts of terror," he said.
Outside the court's Peace Palace, several hundred pro-Israeli demonstrators chanted prayers and waved Israeli flags.
Several wore shirts splattered with red paint reading: "The fence saves lives."
The skeleton of a Jerusalem bus, in which a Palestinian human bomber killed 11 people last month, was displayed 100m from the building before being removed before a demonstration by Palestinians.
Police barricades kept the pro-Israeli group away from a small group of pro-Palestinian protesters that included several ultra-Orthodox rabbis belonging to an anti-Zionist sect.
"The wall is state terrorism," said Hajo Meyer, a Dutch member of European Jews for Justice and Peace.
Dutch police arrested four demonstrators, two from each side. A pro-Israeli woman was detained for kicking a policeman.
The Hague hearings stem from a Palestinian request, backed by the UN General Assembly, to decide whether Israel is legally obliged to tear down the barrier, of which about 180km of a planned 730km have gone up so far.
Al-Qidwa said in his argument he hoped its non-binding ruling could pave the way for international sanctions against Israel.
The court's 1971 opinion that South Africa's occupation of what is now Namibia was illegal heralded UN sanctions against the apartheid regime.
Palestinians say the barrier is illegal under international law because it absorbs chunks of occupied land and causes them hardship.
"We in the court felt absolutely no empathy toward the children, the more than 950 people, who have been killed in acts of terror"
Israeli foreign ministry lawyer
They also say it will effectively cut off 2.5 million people from basic services.
The Palestinians want the barrier dismantled, or at least shifted to follow Israel's boundary with the West Bank before the area was seized along with the Gaza Strip in the 1967 Middle East war.
About a dozen countries were scheduled to present oral arguments in support of the Palestinian position, including Saudi Arabia, Jordan, South Africa, Algeria and Cuba.
"The fact that this court had the courage to pronounce on the legal consequences on the continued presence of South Africa in Namibia contributed to the achievement of democracy," South Africa's Deputy Foreign Minister Aziz Pahad told the court.
The United States, Britain, the European Union and many Western countries have criticised the route of the barrier, but shunned the hearings.
A decision by the court could take several months, but is non-binding on the parties.