A "day of anger" on the Muslim day of rest had been called by Tayssir al-Tamimi, the Palestinian chief justice, who on Tuesday called for "all Palestinians to go and protect al-Aqsa against Israeli plans that aim to destroy the mosque".
On Friday Palestinians hurled stones, bottles and rubbish in outrage over what Israel says is renovation work.
Twenty Palestinians were treated for injuries, a Palestinian medical source said. Witnesses said police arrested a number of people.
Mike Hanna, Al Jazeera's correspondent, said tear-gas shells and rubber-coated bullets were fired in different areas of the Old City, injuring a number of people.
Dr Khalil el-Baba, a doctor treating some of the injured, also said Israeli officers fired rubber-coated steel bullets.
Israeli police denied this.
Sheikh Mohammed Hussein, the Jerusalem mufti, who delivered the main Friday sermon, criticised what he called Israel's "aggression".
He said: "We condemn this blatant Israeli aggression against al-Aqsa mosque and on the worshippers."
Thousands of Palestinians had attended prayers at the mosque and heard him criticise the current Israeli works.
Israel is "Judaizing Jerusalem", he declared, urging Muslims throughout the world to "protect" occupied East Jerusalem and the mosque esplanade.
Jacky Rowland, Al Jazeera's correspondent, said the mufti issued calls for calm over the mosque's loudspeaker system, normally used for the call to prayer.
Maher al-Ami, a journalist for Jerusalem's al-Quds newspaper, said: "We were at Friday prayers and suddenly they [the Israelis] began to shout and throw stun grenades."
Adnan Husseini, director of the Muslim organisation Waqf, said: 'We are surrounded. There is one gate still open but they [the Israelis] won't let anyone leave."