The solemn holiday of Yom Kippur, or Day of Atonement, began Tuesday evening and ends Wednesday at sunset.
Many Jews fast during that time. Families and young people also walk and cycle through empty streets, while Orthodox Jews with prayer shawls can be seen making their way to synagogues.
Security was tight for this year's holiday with fears of a new surge in violence, particularly following a Palestinian gun attack in Jerusalem on Sunday that killed two people.
Overnight, clashes erupted during an Israeli raid in the Silwan area of east Jerusalem, where the gunman lived, residents and local activists said.
Israeli security forces shot dead a 20-year-old Palestinian man, Ali Shiouki, Palestinian officials said.
Later, Israeli police said "masked Palestinians threw stones and incendiary bottles" at border guards in Silwan, putting their lives at risk.
"The border guards then fired at and hit the rioters who fled and took the wounded with them," a spokesman said, adding police subsequently learned one of the wounded had died and was buried.
Clashes also erupted Wednesday in Al-Ram, a Palestinian area on the outskirts of Jerusalem.
Yom Kippur is the second of three successive Jewish holidays that have led to tensions with the Palestinians in the past.
Last week Jews marked Rosh Hashanah, or New Year, and next week they celebrate Sukkot.
Last year's holiday period led to clashes and marked the start of an upsurge in Palestinian gun, knife and car-ramming attacks.
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More than 3,000 police have been deployed to Jerusalem, while the mainly Palestinian eastern sector of the city, occupied by Israel in 1967 and later annexed, has been sealed off with barricades.
Palestinians were also prevented from entering the city from the occupied West Bank and the Gaza Strip during the holiday.
Thousands of Jews visit the Western Wall in east Jerusalem's Old City during the holiday period, while a smaller number go to the nearby Al-Aqsa mosque compound.
The compound is holy to both Muslims and Jews, who refer to it as the Temple Mount.
The site is central to the Israeli-Palestinian conflict, with Palestinians fearing Israel may one day seek to assert further control over it.
On Sunday, a 39-year-old Palestinian who saw himself as an Al-Aqsa protector went on a shooting rampage in Jerusalem, killing two Israelis. He was shot dead by police.
But the atmosphere was different in Tel Aviv, Israel's commercial capital and a far more secular city.
Streets were filled with walkers, bikers and skateboarders, while shops owned by Arab residents that remained open were drawing many customers -- particularly those selling alcohol.
Some in the Mediterranean city had picnics on the beach.
A young skater, Amnon Elkaim, called the day "a little bit magical, where there is really nothing to do except see friends and go to the beach".
A mother with her young son, who wore a Spiderman costume, called it a "real vacation day".