Israeli security forces were on high alert on Friday for fear of violence as the Palestinians began marking the "Nakba" or "catastrophe" which befell them following Israel's establishment in 1948.
"The police are on high alert and we have deployed thousands of police officers in and around Jerusalem, as well as in the north," police spokesman Micky Rosenfeld told AFP.
Police said around 8,000 people had turned up for the traditional Friday prayers at the flashpoint Al-Aqsa mosque compound inside the Old City, which is located on a site considered as the holiest place in Judaism and the third holiest in Islam after Mecca and Medina.
Hundreds more were waiting outside the gates of the Old City, with police refusing to let in any men under 45 who were not carrying a blue Israeli identity card, AFP correspondents said.
Outside Damascus Gate, which is the main entrance to the Old City from Arab east Jerusalem, around 500 young men who had been refused entry could be seen praying.
Inside the walled city, the normally bustling Arab market was almost empty, with police allowing only residents and shopkeepers to enter, alongside those coming to pray, an AFP correspondent said.
Friday morning passed without incident, although as the prayers drew to a close, there were sporadic incidents of unrest, with some stone throwing near Lion's Gate, and youths burning tyres in Al-Tur near the Mount of Olives.
The main rallies and marches were expected to kick off after the lunchtime prayers in a series of events to mark the run-up to Nakba Day, which will be commemorated on Sunday.
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Palestinians and their Arab-Israeli kin were to stage events across Israel and the occupied territories, while activists behind "The Third Intifada" website were also urging people to march towards homes from which they fled or were forced out of when Israel was created in 1948.
Refugees in Egypt, Lebanon, Jordan and Syria were also to mark the anniversary from Friday onwards.
Israeli police said in a statement that they would step up checks on anyone coming in from the West Bank to annexed east Jerusalem, saying: "Police will act firmly to prevent any attempt to disturb public order by anybody."
And the military said troops were also on alert.
"The army is prepared for any unusual event during the coming weekend," a spokeswoman told AFP, with press reports saying troops had been ordered to show restraint unless the demonstrators began marching on Jewish settlements or army bases.
Israel celebrated the 63rd anniversary of its creation on Tuesday, in accordance with the Hebrew calendar.
More than 760,000 Palestinians -- estimated today to number 4.7 million with their descendants -- were pushed into exile or driven out of their homes in the conflict that followed Israel's creation.
Around 160,000 Palestinians stayed behind and became known as Arab Israelis. They now number around 1.3 million people, which is about 20 percent of Israel's population.
Israel has always refused to allow the return of the 1948 refugees for fear that a massive influx would threaten the Jewish majority in Israel, which now counts some 5.8 million Jewish citizens.