Police arrested Sirri Nusaiba on Wednesday, saying he was suspected of employing illegal aliens. Nusaiba faces charges and a court appearance.
"I was released after committing myself to paying a fine of 10,000 shekels ($2200) if I don't show up at a possible trial," Nussaiba said.
"My arrest is one of the occupation's actions that will not go away unless the occupation ceases to exist," he told Aljazeera on Wednesday.
Nusaiba, al-Quds University president who also heads a campaign to end Israeli-Palestinian conflict, was arrested by police at the campus in Arab East Jerusalem and taken away for questioning.
Police said several people were rounded up at the campus in Bait Hanina district because they did not have residency permits. Nusaiba was detained after identifying himself as their employer.
The professor has been arrested before on charges of illegal
But a spokesman from Nusaiba's office said Israeli forces detained the academic in an attempt to weaken the educational organisation in Jerusalem, and put a pressure on its Palestinian employees.
Nusaiba's attorney, Jawad Bulus, earlier said the Israeli police had treated him "brutally". Bulus also said the police were not allowing Nusaiba's lawyers to see him.
Israeli police have intensified sweeps for Palestinians working without permits since the start of an uprising, more than three and a half years ago.
Also on Wednesday, a car bombing by a Hamas resistance fighter wounded four Israeli soldiers near a central Gaza Strip settlement.
Israeli military sources said a booby-trapped jeep, apparently on its way to ramming into the Kfr Darum settlement, exploded when troops opened fire on the vehicle.
The bomber belonged to the
armed wing of Hamas
Four soldiers travelling in a car just behind the attacker's vehicle were wounded by the blast, two of them seriously, the sources added. The bomber died in the attack.
Palestinian witnesses said the attacker's car was painted in the same colour as army vehicles.
Resistance fighters from Izz al-Din al-Qassam Brigades - Hamas's armed wing - announced through loudspeakers in the nearby refugee camp of Nusairat that the dead attacker was Tariq Himaid, 23.
Talking to reporters in Nussairat, the fighter's father said he was "proud" of his son and added, the attack was perpetrated "in response to Israel's crimes in the Palestinian territories".