The woman pulled a knife on the security force members at the entrance to Damascus Gate but was shot dead before she was able to stab anyone, a police spokeswoman said in a statement.
Photos posted on social media showed the apparently middle-aged woman lying face down after the attack outside the gate, a main entrance to the Old City.
A number of other entrances to the Old City, a key tourist attraction, were also sealed off, media reported.
Most of the Palestinians killed were carrying out knife, gun or car-ramming attacks, according to Israeli authorities. Others died during protests, clashes or in Israeli air raids on the Gaza Strip.
Violence has subsided in recent months, despite sporadic attacks.