The Israeli cabinet on Sunday approved a $90 million dollar socio-economic development plan for annexed east Jerusalem which focuses on increased security and police presence in the area, the municipality said.
"One of the main goals of the plan that was approved is to bring about a significant decline in violence by means of integrated activity to reduce gaps in infrastructure, employment, education and social welfare and by boosting enforcement and personal security," said a statement from city hall.
The plan involves an increase in the number of policemen on the beat as well as a greater number of security cameras.
"According to Israel police assessments, the plan will lead to a significant decline in the short- and medium-term of over 50 percent in displays of violence," it said.
Police figures quoted by the municipality indicate that in March and April, there were 390 incidents of stone-throwing at the security forces and vehicles in east Jerusalem, as well as dozens of cars stolen and break-ins.
"These are offences with nationalist characteristics that are not perpetrated in a similar scope in other parts of the country," it said.
"The basic assumption for the civic aspects of the plan is the existence of a deep link between the scope and level of violence by residents of eastern Jerusalem and the standard of living in neighbourhoods in the eastern part of the city.
The plan includes improvements in infrastructure, the education system and improved social assistance, it said without saying how such objectives would be achieved.
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Figures provided by the municipality said there were about 306,000 Palestinians living in east Jerusalem, whose civil status is that of residents, not citizens. They account for 38 percent of the city's overall population.
Israel seized control over the Arab eastern sector of Jerusalem during the 1967 Six Day War and later annexed it in a move never recognised by the international community.
It refers to the entire city as its "united, undivided" capital.
But the Palestinians want the eastern sector of the city as capital of their promised state, with the city's future one of the biggest issues of the conflict.
By choice, almost all Palestinians living in east Jerusalem hold permanent residency status, meaning they have Israeli IDs but not passports.
They are entitled to all the insurance benefits of Israeli citizens and can vote in municipal -- but not national -- elections.
They enjoy complete freedom of movement within the country, unlike their compatriots in the West Bank and the Gaza Strip, who cannot enter the Jewish state without special permits that are hard to obtain.
The left-leaning Haaretz newspaper said the move was aimed at "tightening Israeli control of east Jerusalem and strengthening the connection between the 300,000 Palestinians living there and the State of Israel."
The action plan was put together by an inter-ministerial committee which did not make any connection between the rise in violence and the deadlock in peace moves, Haaretz said.
There are more than 200,000 Israelis living in settlement neighbourhoods in annexed east Jerusalem and the Israeli government does not see construction there as settlement building.