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In an unprecedented move, entry into the Old City will be permitted only for "Israeli citizens, Old City residents, tourists, Old City business owners and pupils learning there," according to a police statement.
The decision was made "in the wake of the security situation in Jerusalem and the serious terror attack in the Old City" and after "a long series of consultations among politicians, police and other security forces."
The police added that only male Palestinian worshippers aged 50 or over would be allowed to pray on Temple Mount. There are no restrictions on women. Entry to Temple Mount will only be through the Lions' Gate.
Dozens demonstrated near the Al-Aqsa mosque in protest of the restrictions before Israeli forces dispersed the demonstration. Several were injured due to smoke inhalation.
Streets in the Old City were practically deserted after business owners in the Muslim Quarter and schools in East Jerusalem declared a strike. Hundreds of Israel Police and Border Police forces have flooded the Muslim Quarter's streets since late Saturday night.
Jerusalem Mayor Nir Barkat walked through the site Sunday morning and backed the police's decision to close off the Old City.
"It's a good, specific solution. This is a correct example of how the police needs to act," Barkat said. "The closure is intended to protect Jews who only want to pray."
Barkat additionally called for action to be taken against incitement to violence on the Palestinian side, and called on visitors to continue coming to the Old City and the Western Wall.
At the same time, the Gur Hasidic sect advised its members to avoid the Western Wall area and "not to go through the streets" in wake of recent unrest in Jerusalem. Gur is the largest Hasidic sect in Israel. Deputy Health Minister Yaakov Litzman is a member of the sect. Thousands of Gur members from all over Israel are in Jerusalem for the Hoshanah Rabbah and Simhat Torah holiday celebrations.
Earlier Sunday, the Israel Defense Forces arrested the father and uncle of Fadi Alon, 19, who was shot to death while fleeing policemen after the second Saturday night attack, in which he allegedly moderately wounded a Jewish teen with a knife. His father and uncle were arrested in the East Jerusalem neighborhood of Isawiyya.
Palestinians cast doubts on the Israeli report that Alon tried to stab a Jew. Based on a video that was distributed, they report that a group of Jews attacked him and called on the police to shoot him without reason.