The latest violence was preceded by a vicious attack carried out by Jewish settlers against Palestinians on Wednesday.
Fifteen Palestinians were arrested in Israeli-occupied east Jerusalem overnight as Israeli police responded with brute force to protests being held against the forced eviction of Palestinian residents.
The second straight night of violence in the Sheikh Jarrah neighbourhood was fuelled by the long-running legal case which centres on the homes of four Palestinian families claimed by Israeli settler Jews in the strategic district near Jerusalem's Old City. The case is due to go before the Israeli Supreme Court on Monday.
The violence came as Muslims prepared to mark the last Friday of the fasting month of Ramadan, with tens of thousands of Palestinian worshippers set to gather at the sacred Al Aqsa mosque compound.
Amid the attacks by extremist Jewish settlers on Palestinian residents, far-right Israeli lawmaker, Itamar Ben-Gvir, visited Sheikh Jarrah to voice his support for the Jewish settlers.
Repeating in Hebrew the refrain "this house is ours", Ben-Gvir announced that he was setting up a makeshift parliamentary office in a tent outside a building occupied by settlers.
The latest clashes were preceded by an incident of violence on Wednesday night, when 22 Palestinians were wounded, according to the Red Crescent, and 11 others were arrested by Israeli police.
"This land is Palestinian... and we, the inhabitants of the neighbourhood, we cannot accept that this land is theirs. This land is ours," said 77-year-old Nabeel al-Kurd, one of those facing eviction.