Israel shut the Al-Aqsa mosque compound Thursday then promised to reopen it, after clashes in east Jerusalem where police killed a Palestinian accused of trying to murder a hardline rabbi.
The pledge also came after Arab and US calls for the Jewish state to reopen the Holy City flashpoint.
Police spokeswoman Luba Samri told AFP the shrine would open early Friday "for dawn prayers, after midnight" following its first closure in decades.
Israel said its clampdown on the shrine, which is holy to Jews and Muslims alike, was a temporary measure aimed at calming tempers.
Samri said that because of fear of unrest at Friday midday prayers, entry for Muslim men would be restricted to those over 50.
There would be no restrictions on Muslim women.
Non-Muslims are routinely not allowed access on Fridays.
Thursday's closure brought Arab and US calls for Muslim worshippers to be allowed access, and Palestinian president Mahmud Abbas condemned it as an Israeli "declaration of war".
Wednesday night's wounding of the rabbi and the subsequent killing of the suspected gunman sent tensions soaring to a new high, following months of almost daily clashes between Palestinians and Israeli police in Jerusalem's occupied eastern sector.
Officials from the Islamic Waqf which administers the compound said it was the first closure since Israel seized Arab east Jerusalem during the 1967 Six-Day War.
"This dangerous Israeli escalation is a declaration of war on the Palestinian people and its sacred places and on the Arab and Islamic nation," Abbas said through his spokesman Nabil Abu Rudeina, warning it would only fuel "more tension and instability".
Jordan's Islamic affairs minister, Hayel Daoud, said it amounted to a case of Israeli "state terrorism". Under its 1994 peace treaty with Israel, Jordan has responsibility for Muslim holy sites in Jerusalem.
But a spokesman for Israeli Prime Minister Benjamin Netanyahu said the closure aimed "to prevent riots and escalation as well as to restore calm and status quo to the Holy Places".
Residents of the Jerusalem neighbourhood of Abu Tor were left reeling after a dawn police raid killed Muataz Hijazi, 32.
Israel said he was behind the attempt to gun down far-right activist Yehuda Glick, who has lobbied for Jewish prayer rights at the Al-Aqsa compound.
He was buried in east Jerusalem late at night with a heavy police presence to prevent the funeral becoming a riot, an AFP journalist at the scene said.
Despite a court order limiting the number of mourners to 45, about 300 people followed his body into the cemetery, but police did not try to stop them by force.
Police said Hijazi shot at officers who returned fire, killing him.
Signup to our newsletter and follow us on Facebook and Twitter!
His family told a different story.
"They burst into the house shortly before 6:00 am, ransacked Muataz's room and then shot him on the roof," said his brother Khalil, 34.
The Islamic Jihad group said Hijazi was one of its militants.
Abu Tor straddles west Jerusalem and the Arab eastern sector, and borders the volatile district of Silwan that has been the focus of months of confrontations.
In sidestreets near Hijazi's home, riot police fired tear gas and rubber bullets at around 50 stone-throwing Palestinian youths in clashes that erupted after the shooting.
- 'More complex than IKEA' -
In a development the Palestinians claimed was related to the unrest in Jerusalem, Sweden announced its formal recognition of a Palestinian state, becoming the first EU member in western Europe to do so.
Abbas hailed Stockholm's decision as "brave and historic".
Israel recalled its ambassador from Sweden for "consultations" and Foreign Minister Avigdor Lieberman denounced the move as "deplorable", issuing a sardonic statement noting that "relations in the Middle East are a lot more complex than the self-assembly furniture of IKEA".
In a bid to restore order in Jerusalem, Netanyahu ordered a "significant increase" in police deployments but called for calm after rightwing groups reacted furiously to the attempted murder of Glick.
In the Old City, police fanned out in force, imposing a near lockdown in parts, an AFP correspondent said.
Although non-Muslims are authorised to visit the Al-Aqsa compound, Jews are not allowed to pray there for fear it could disturb the fragile status quo.
- American-born radical -
Around 50 far-right Jewish activists staged a protest near the ramp leading to the only entrance for non-Muslims to the Al-Aqsa plaza, waving Israeli flags and shouting: "Liberate the Temple Mount!"
Police arrested four people for trying to force their way on to the plaza.
Glick, who was in serious but stable condition after being hit by a hail of bullets, was shot after giving a talk on Jewish prayer at Al-Aqsa at a centre in west Jerusalem.
His assailant was employed at the restaurant there and had finished his shift shortly before the attack, the centre's deputy director Moshe Foxman told public radio.
New York-born Glick, 48, immigrated to Israel at the age of nine with his family.