As Israeli and Palestinian leaders faced pressure to respond, Palestinian president Mahmud Abbas announced late Friday he was freezing contacts with Israel over the holy site dispute.
The unrest came after Israeli ministers decided not to order the removal of metal detectors erected at entrances to the Haram al-Sharif compound, known to Jews as the Temple Mount, following an attack nearby a week ago that killed two policemen.
In anticipation of protests on Friday, Israeli police barred men under 50 from entering the Old City in annexed east Jerusalem for prayers, while all women were allowed in.
Police said later in the day that discretion could be applied in the use of the metal detectors instead of forcing everyone to go through them.
But Palestinian and religious leaders still called on worshippers not to enter until the devices were removed.
Hundreds held prayers in the streets near the gates of the Old City in protest. According to police, dozens of people entered the compound.
Crowds gathered outside Jerusalem's Old City found shops closed and streets around Damascus Gate -- the entrance most heavily used by Palestinians -- blocked.
Police later fired stun grenades and tear gas towards protesters outside the Old City, while Palestinians threw stones and other objects at security forces in some areas.
One Palestinian was shot dead by Israeli gunfire in the A-Tur neighbourhood of east Jerusalem, according to the Palestinian health ministry.
A second Palestinian was killed by gunfire in east Jerusalem, while a third was shot dead in Abu Dis in the occupied West Bank, the ministry said, without providing details.
Israel's army confirmed it was involved in clashes in Abu Dis.
In the evening, a Palestinian broke into a home in a Jewish settlement in the West Bank and stabbed four Israelis, killing three of them, the Israeli army said.
The assailant, believed to be 20, was shot in the incident and taken to hospital, but his condition was unclear.
The Palestinian Red Crescent reported that 450 people were wounded in Jerusalem and the West Bank throughout the day, including 170 from live or rubber bullets.
Medics reported another 40 wounded in the Gaza Strip.
Israeli police reported 29 arrests in Jerusalem and the West Bank, adding that five officers were lightly injured, coming under attack with stones and fireworks.
- 'Take control' -
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Tensions have risen since police installed the metal detectors in a move Palestinians and other Muslims perceive as a means for Israel to boost its control over the compound containing the revered Al-Aqsa mosque and Dome of the Rock.
The controversy has resonated beyond Israel and the Palestinian territories, with the United States and the UN Middle East envoy expressing concern.
Palestinian president Mahmud Abbas spoke with US counterpart Donald Trump's senior adviser and son-in-law Jared Kushner, urging the White House to intervene, the Palestinians' official Wafa news agency reported.
He later announced he was freezing contacts with Israel over the security measures at the holy site.
Abbas called the measures "falsely presented as a security measure to take control over Al-Aqsa mosque".
Israeli Prime Minister Benjamin Netanyahu stressed the metal detectors were intended to ensure the safety of worshippers and visitors and not an attempt to disturb the fragile status quo under which Jordan is custodian of the site and Jewish prayer is forbidden.
Palestinians have been refusing to enter the compound all week in protest at the metal detectors.
The main weekly prayers on Fridays draw the largest number of worshippers -- typically thousands -- and speculation had been mounting that Netanyahu might order the metal detectors removed.
But after consultations with security chiefs and members of his security cabinet, Netanyahu decided not to do so.
- Smuggled weapons -
The metal detectors were put in place following a gun and knife attack near the holy compound that killed two Israeli policemen on July 14.
Three Arab Israeli assailants fled to the compound after the attack, where they were shot dead by security forces.
Israeli police said the weapons were smuggled into the holy site which was then used as the launchpad for the attack.
Israel initially closed the compound for two days following the attack in a highly unusual move, shutting it for last Friday's prayers.
Israel began reopening it on Sunday, but with metal detectors in place to prevent weapons being smuggled inside.
The Haram al-Sharif/Temple Mount is central to the Israeli-Palestinian conflict.
It lies in east Jerusalem, seized by Israel in the 1967 Six-Day War and later annexed in a move never recognised by the international community.
It is considered the third holiest site in Islam and the most sacred for Jews.