Many Arab leaders have also been angered by the opening of a restored 17th century synagogue near the al-Aqsa mosque compound in Jerusalem, home to Islam's third holiest site.
Concerns over Jerusalem
They see such acts as a clear intention by Israel to "Judaise" Jerusalem and undermine chances for a peace agreement with the Palestinians who consider East Jerusalem the capital of their future state.
Jordan's King Abdullah warned that Israel was "playing with fire" and trying to alter the identity of Jerusalem.
Bashar al-Assad, the president of Syria, described tensions with Israel as a "state of no-war, no-peace," and said his country was ready if "war is imposed" by Israel.
Amr el-Kahky, Al Jazeera's correspondent at the summit, said while leaders have a unified stand on Jerusalem and Israeli activity there, huge challenges remain.
"One thing [they could disagree on] could be the phrasing - whether they want to withdraw the approval they gave Mahmoud Abbas, the Palestinian president, to go into the US proposed indirect talks with the Israelis.
"We understand they are trying to say no to talks without Israel freezing settlement activities.
Arab leaders are expected to ratify an agreement drafted by their foreign ministers to raise $500m in aid to improve the living conditions for Palestinians in Jerusalem as part of a "rescue" plan for the city.
A senior Palestinian official said the money would go towards improving infrastructure, building hospitals, schools, water wells and providing financial support to those whose houses have been demolished by Israeli authorities.
The leaders are also due to discuss a number of strategies, including keeping a record of what they consider to be Israeli "violations" in Jerusalem to refer them to higher bodies such as the International Criminal Court, based in the Hague in the Netherlands.
Muammar Gaddafi, the Libyan leader, wants the summit to be one of unity, and has invited Ban Ki-moon, the UN chief, Silvio Berlusconi, the Italian prime minister, and Recep Tayyip Erdogan, the Turkish prime minister, to address Saturday's opening session.
Ban met with Arab officials, including Abbas, on Friday, to brief them on last week's meeting of the Middle East Quartet, made up of the US, the European Union, Russia and the UN, which called on Israel to halt settlements.