At least one person was killed in clashes with Israeli troops when thousands of Palestinians demonstrated against US President Donald Trump's recognition of Jerusalem as Israel's capital.
The Palestinian president said Washington could no longer be a peace broker.
Across the Arab and Muslim worlds, thousands more protesters took to the streets on the Muslim holy day, expressing solidarity with the Palestinians and outrage at Mr Trump's reversal of decades of US policy.
Israeli soldiers shot dead a Palestinian man near the Gaza border, the first confirmed death in two days of unrest.
Scores of people were wounded on the "Day of Rage".
The Israeli army said hundreds of Palestinians were rolling burning tyres and throwing rocks at soldiers across the border.
"During the riots IDF (Israeli Defense Forces) soldiers fired selectively towards two main instigators and hits were confirmed," it said.
More than 80 Palestinians were wounded in the occupied West Bank and Gaza by Israeli live fire and rubber bullets, according to the Palestinian Red Crescent ambulance service.
Dozens more suffered from tear gas inhalation. Thirty-one people were wounded yesterday.
As Friday prayers ended at the Al Aqsa mosque in Jerusalem, worshippers made their way toward the walled Old City gates, chanting "Jerusalem is ours, Jerusalem is our capital" and "We don't need empty words, we need stones and Kalashnikovs".
Scuffles broke out between protesters and police.
In Gaza, controlled by the Islamist group Hamas, calls for worshippers to protest sounded over mosque loudspeakers.
Hamas has called for a new Palestinian uprising like the "intifadas" of 1987-1993 and 2000-2005, which together saw thousands of Palestinians and more than 1,000 Israelis killed.
"Whoever moves his embassy to occupied Jerusalem will become an enemy of the Palestinians and a target of Palestinian factions," said Hamas leader Fathy Hammad as protesters in Gaza burned posters of the US President.
"We declare an intifada until the liberation of Jerusalem and all of Palestine."
At the United Nations, US ambassador to the United Nations Nikki Haley said Washington still had credibility as a mediator with both Israel and the Palestinians.
"The United States has credibility with both sides. Israel will never be, and should never be, bullied into an agreement by the United Nations, or by any collection of countries that have proven their disregard for Israel's security," she told the UN Security Council.
But Palestinian President Mahmoud Abbas appeared defiant.
"We reject the American decision over Jerusalem. With this position the United States has become no longer qualified to sponsor the peace process," Abbas said in a statement. He did not elaborate further.
France, Italy, Germany, Britain and Sweden called on the United States to "bring forward detailed proposals for an Israeli-Palestinian settlement".