"Dozens of Palestinians threw rocks at police forces near Nablus Gate. Two of them were arrested," said Luba Samri.
An AFP correspondent said some of the demonstrators were carrying banners which called for a "third intifada," or anti-Israeli uprising.
The protest was an extension of the Palestinian demonstrations held in the Old City earlier this week to mark what the Arabs regard as the "Nakba" (catastrophe) of the Jewish state's creation on May 15, 1948, she said.