The settlers view Jerusalem as their "eternal capital" and want to rid it of Arabs residents "affirming Jewish sovereignty over the whole city".

But the Palestinians want East Jerusalem as the capital of any future Palestinian state, and have refused to take part in peace negotiations while Israel continues to build on the occupied land.  

Israel occupied the area after the 1967 Middle East war in a move not recognised by the international community.

Israeli criticism

The march had attracted criticism from Israeli politicians, including the government of Binyamin Netanyahu, the prime minister, who tried to stop it from being held.

Uzi Landau, Israel's infrastructure minister and a member of the hardline Yisrael Beitenu party, said he regretted the event.

in depth

  Israel expands settlements
  Map of East Jerusalem housing plan
  White House split over settlements
  Can the US broker a breakthrough?
  Israelis divided over settlements?
  Jerusalem's religious heart
  Q&A: Jewish settlements
  Jerusalem: A city divided
  Riz Khan:
  US and Israel: scarred relations?
  Battle over settlements
  Inside Story:
  US-Israel: Unsettled dispute
  Israel: Rise of the right
  Holy Land Grab

"It's a shame that a provocation of this sort takes place," he told reporters. "I would rather it didn't happen."

Mustapha Barghouti, an independent Palestinian member of parliament, told Al Jazeera that the demonstration showed the dynamics of power within Israel.

"I don't think Netanyahu is governing the settlers. The settlers are governing Netahyahu," he said. "This is a well planned provocation."

The march, organised by settler leaders Baruch Marzel and Itamar Ben Gvir, comes as Israel prepares to declare the beginning of US-mediated indirect talks with the Palestinians brokered by George Mitchell, the White House Middle East envoy.

"We have come to say to Obama and to George Mitchell that Jerusalem belongs to the Jewish people and not to the Arabs," Ben Gvir told the AFP news agency.  

Israeli officials involved in efforts to renew the peace process have been quoted by the Haaretz newspaper as saying that so-called proximity talks between Israel and Palestinians will start no later than mid-May.

Mahmoud Abbas, the Palestinian president, has received an invitation to talks at the White House in May as part of Washington's latest push to broker peace in the region.

But Barack Obama, the US president, acknowledged he was unable to extract a commitment from Netanyahu to freeze construction of housing units in East Jerusalem, Haaretz said.

Mitchell told Netanyahu on Friday that Washington was committed to Israel's security and wanted a peace settlement that would give the Palestinians a state.

"That has been American policy. That is American policy. That will be American policy," Mitchell said.

Abbas said on Saturday that Obama should impose a peace deal but rejected the idea of establishing a state within temporary borders.

"Since you, Mr President and you, the members of the American administration, believe in this, it is your duty to call for the steps in order to reach the solution and impose the solution - impose it," Abbas said.

"But don't tell me it's a vital national strategic American interest ... and then not do anything."

The Palestinians pulled out of talks with the Israelis during Israel's 22-day offensive in the Gaza Strip in December 2008 and have refused to return until all settlement activity is halted.