Twenty two Palestinians were wounded in overnight clashes with Israeli police in annexed east Jerusalem, the Red Crescent said on Thursday, as tensions flare over a controversial land rights case.

Police confirmed 11 arrests in the latest unrest to rock the Sheikh Jarrah neighbourhood near Jerusalem's walled Old City, where land disputes between Palestinians and Jewish settlers have fuelled hostility for years.

Palestinian protests, which began late on Wednesday, continued into the early hours.

The legal case centers on the homes of four Palestinian families on land claimed by Jews.

Earlier this year, a Jerusalem district court ruled the homes legally belonged to the Jewish families, citing purchases decades ago.

The Jewish plaintiffs claimed their families lost the land during the war that accompanied Israel's creation in 1948, a conflict that also saw hundreds of thousands of Palestinians displaced from their homes.

The Palestinian families implicated in the case have provided evidence that their homes were acquired from Jordanian authorities who controlled east Jerusalem from 1948 to 1967.

Amman has intervened in the case, providing documents to support the Palestinian claims.

Israel seized east Jerusalem in 1967 and later annexed it, in a move not recognised by most of the international community.

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The district court ruling infuriated Palestinians in Sheikh Jarrah who viewed it as a further step in what they see as a Jewish settler effort to drive Arabs out of east Jerusalem.

Weeks of clashes that have seen police use skunk water cannons and deploy anti-riot police on horseback have resulted in several arrests.

'We reject this'

Israel's Supreme Court has ordered the sides to seek a compromise.

Sami Irshid, a lawyer for the Palestinians, said the Nahalat Shimon settler movement proposed that one member of each concerned Palestinian family be recognised as a “protected tenant”. That would temporarily delay eviction until the protected tenant died, at which point the home would return to Nahalat Shimon, Irshid said.

“We reject this completely,” Mona al-Kurd, one of the Palestinian residents told AFP.

“The settlers want us to recognise their property rights, it is impossible.”

Yehonatan Yosef, an activist with Nahalat Shimon, accused the Palestinian families of rejecting “any compromise”.

“It's their problem,” he said, noting that if the Supreme Court ruled in the settlers' favour, the Jewish families would do what they wished with each plot.

The Supreme Court has indicated that if the sides cannot reach a compromise, it will rule on whether the Palestinians can appeal the district court decision.

An appeal process could take years.

Mohammed Deif, the reclusive leader of the military wing of Palestinian Islamist group Hamas, issued a rare public warning on Tuesday, saying Israel would pay a “high price” over the Sheikh Jarrah dispute.

The Palestinians claim east Jerusalem as their future capital, while Israel regards the entire city as its “undivided capital”.

Palestinian foreign minister Riyad al-Maliki sent a letter to the International Criminal Court urging it to “take a clear and public stand against crimes perpetrated by Israel against the Palestinian people in Sheikh Jarrah neighbourhood“.