Shopkeepers in Hebron had closed their stores for the day in protest at the decision Binyamin Netanyahu, the Israeli prime minister, to include the Cave of the Patriarchs on the list of about 150 sites that the government protects.
The city has long been a flashpoint between Palestinians and Israelis, with several hundred Jewish settlers living in heavily guarded enclaves among approximately 160,000 Palestinians.
The Cave of the Patriarchs is the second holiest site for Jews and said to be where the patriarchs of the religion, Abraham, Isaac and Jacob, were buried along with three of their wives.
"This Israeli decision is provocative for Muslims around the world and especially Palestinians"
chief Palestinian negotiator
It is also venerated by Christians and Muslims, who call it al-Ibrahimi mosque, reflecting the fact that Abraham is considered the father of both Judaism and Islam.
"We strongly condemn this decision which yet again confirms the Israeli government's determination to impose facts on the ground," Saeb Erakat, a senior aide to Mahmoud Abbas, the Palestinian president, told the AFP news agency on Monday.
"We call on the international community to consider this decision illegal," he said.
"This Israeli decision is provocative for Muslims around the world and especially Palestinians."
Israeli media reported that Netanyahu had bowed to pressure from right-wing politicians and the settlers' lobby to include the Cave of the Patriarchs and Rachel's Tomb in Bethlehem on the list.
On Sunday, Netanyahu told a cabinet meeting that the country's existence depended not only on its defence force and its economic resilience, but also on its "ability to justify our connection to the land".
"It is anchored first and foremost in our national and emotional legacy," he said.
But Mark Regev, a spokesman for the Israeli government, said the list was not meant to set borders.
"The purpose of the list ... is to single out sites that are of great importance to the Jewish people," he said.
Robert Serry, the United Nations envoy to the Middle East, criticised Israel's decision and said that it could threaten hopes of resuming peace talks.
"I urge Israel not to take any steps on the ground which undermine trust or could prejudice negotiations, the resumption of which should be the highest shared priority of all who seek peace," he said.
Netanyahu has recently said he is prepared to resume negotiations without preconditions, but the Palestinian Authority has refused until Israel halts all settlement construction in the West Bank and east Jerusalem.
The Palestinians want an independent state based on the West Bank, Gaza Strip and east Jerusalem, under which it would control security, borders and other matters.