As a result, thousands of effectively illegal structures have been built in recent decades with Israel responding by destroying dozens of houses each year.
Nir Barkat, the mayor of Jerusalem, had vowed to crack down on illegal construction in the city, including east Jerusalem, whose fate is one of the thorniest issues in the Israeli-Palestinian conflict.
But the United Nations on Tuesday called for an immediate halt to all forced evictions and demolitions of Palestinian homes in the area, which was seized by Israel in the 1967 war.
"Such actions run counter to international law and have a serious and long-term negative impact on Palestinian families and communities,” the UN Office for the Co-ordination of Humanitarian Affairs (OCHA) said in a statement.
"The UN reiterates its call for an immediate and unconditional halt to such actions and urges the state of Israel to protect the civilian population in OPT [occupied Palestinian Territories] from further displacement and dispossession."
At least 600 Palestinians ave been displaced by eveictions and demolitions since the beginning of the year, according to OCHA, and many thousands more may be at risk.
The United States, which is seeking to revive peace talks in the long-standing dispute, called the latest demolitions "unhelpful".
The forced evictions and demolitions have raised tensions in the eastern half of the city, which Palestinians see as the capital of any future independent state.
The situation has prompted a number of protests and Palestinians have attempted to challenge the municipality's actions in the courts.
An Israeli rights group, Ir Amim, said the demolitions were "an irresponsible step that could escalate the situation in the city and bring it to a new boiling point".
Palestinians and human rights groups have condemned Israel's demolition policy, accusing it of using the demolitions to shift east Jerusalem's demographic balance.
"International bodies and the United Nations Security Council should intervene to stop Israeli authorities from carrying out these criminal actions," Adnan al-Husseini, the Palestinian-appointed governor of Jerusalem, said.
A UN report in May showed that 1,500 demolition orders issued by the Jerusalem municipality were pending for illegal Palestinian dwellings.
The report said that if the orders were implemented, about 9,000 Palestinians would be displaced.
There are about 200,000 Jews living in East Jerusalem, alongside an estimated 250,000 Palestinians.