The Palestinian government spokesman Ibrahim Melhem accused the Israeli police of "assaulting religious clerics, mosque Imams and worshippers", saying "it is a flagrant violation of global law". The site is now home to the Dome of the Rock and the Al Aqsa Mosque, the third-holiest site in Islam.
Dozens of Palestinians were injured including Grand Mufti of Al-Quds, Sheikh Muhammad Hussein and former minister Adnan Al-Hasani, Palestinian media reported.
Palestinians on Sunday denounced "raids by Israeli settlers" into the Al-Aqsa Mosque compound in East Jerusalem on the first day of Eid al-Adha which led to clashes between Palestinian worshippers and Israeli police.
After relative calm returned and following criticism from Israeli far-right politicians, police then opened the site to Jewish visits, sparking further clashes.
The Muslim celebrations coincided with the Jewish holiday of Tisha B'av, which sees an increase in Jewish visits to the Al-Aqsa compound.
On Friday, the Muslim Waqf trust, which oversees the site, urged Muslim worshipers to crowd the Al-Aqsa Mosque on the Temple Mount and keep Jews from entering, after police said they would consider allowing non-Muslim visitors.
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"All of a sudden [security forces] arrived and began to hit and fire sound grenades", she told the AFP news agency.
The PLO Human Rights and Civil Society Department said in an emailed press statement that such a move on this very day "harms every Muslim and their sacred rituals", urging for "implementation of worldwide laws to face the Israeli schemes for the Al-Aqsa mosque".
Hanan Ashrawi, a senior leader in the Palestine Liberation Organization, said Israel was "fueling religious tensions in Jerusalem", adding that Israeli officials are "fully responsible for its grave consequences". In June, Israeli troops accessed the holy site with hundreds of Jewish settlers to mark what they call the "reunification of Jerusalem".
It is located in east Jerusalem, occupied by Israel in the 1967 Six-Day War and later annexed in a move never recognised by the global community.
Israel backtracked on a decision to close the site to Jewish visitors, and angry Palestinians clashed with police.
Eid al-Adha commemorates God's testing of Abraham's faith by commanding him to sacrifice his son.