Plans for the eviction had been criticised by the European Union, United Nations and various Western governments, though not the United States.
Fahamiya Shamasneh, 75, told AFP police arrived unannounced before dawn and forced her out of the house along with her husband Ayoub, 84, their son and his family.
The couple had lived in the house in the Sheikh Jarrah neighbourhood of east Jerusalem near the historic Old City for 53 years.
"It is the hardest day," Fahamiya Shamasneh said tearfully on the street after being evicted.
Also Read
She said she was heating milk for her grandchildren when "they knocked on the door and said 'open its the police'.
"They took us out and threw us outside.
"What greater injustice is there than this? Maybe we will sleep in the street."
The United Nations agency for Palestinian refugees, UNRWA, said it would seek to support the family financially to find another home.
The Shamasnehs had for years been fighting a court battle against Jewish claimants who said the building was their family property, which they fled when east Jerusalem was occupied by Jordanian troops in the 1948 war that led to the creation of the Jewish state.
During that war, thousands of Jews fled Jerusalem as Jordanian-led Arab forces seized the city, while hundreds of thousands of Palestinians fled from land that was later to become Israel.
No such law exists for Palestinians who lost their land.
Disclaimer: No Business Standard Journalist was involved in creation of this content