Palestinian leaders denounced the killing, holding Israel responsible and demanding the government of Prime Minister Benjamin Netanyahu act to prevent revenge attacks.
"I demand the Israeli government punish the killers if it wants peace between the Palestinian and the Israeli peoples," said Palestinian president Mahmud Abbas.
Netanyahu also condemned the "despicable murder" and ordered investigators to work "as quickly as possible" to track down the perpetrators, while urging both sides "not to take the law into their own hands".
And police confirmed a body had been found in a forest in Givat Shaul in west Jerusalem, although they refused to link the two incidents.
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However, DNA tests proved the body was that of the missing teenager, his father said.
"The body belongs to my son," Hussein Abu Khder told AFP, saying his identity had been confirmed through tests but the cause of death was not immediately clear.
The attack is widely believed to have been carried out in revenge for the kidnap and killing of three Israeli teenagers by Palestinian militants, with Israeli police raising the alert to the second highest level across the country.
Clouds of black smoke rose into the sky as hundreds of masked Palestinians hurled stones at Israeli police in riot gear, who responded by firing rubber bullets, tear gas and sound bombs.
The Red Crescent said at least 65 people had been hurt in the clashes, three by live bullets. At least 35 people were injured by rubber bullets, including six journalists.
The normally-bustling main road through Shuafat was littered with stones and the light rail service which passes through the neighbourhood was suspended. Clashes were also reported in the neighbourhood of Ras al-Amud near the Mount of Olives.