Palestinians set light to debris and hurled rocks at Israeli troops who fired tear gas and water cannons to disperse a demonstration in Bethlehem.
In Gaza, Palestinians threw stones across the border fence at Israeli soldiers, who responded with live fire.
At least 31 people have been injured by Israeli army gunfire, according to medics, including one person in a critical condition.
The unrest comes after President Trump announced on Wednesday he believes “it is time to officially recognise Jerusalem as the capital of Israel”.
The announcement unravelled years of work to establish peace in the Middle East and sparked warnings from Hamas about possible uprisings against Israel.
Spontaneous protests broke out in the region overnight and despite the deployment of thousands of Israeli troops there are few signs that tensions will subside quickly.
The Islamist group said Trump had “opened the gates of hell” with his “flagrant aggression” while Turkey strongly condemned the move.
Hamas leader Ismail Haniya called for a “day of rage” after Trump’s announcement, adding: “We have given instructions to all Hamas members and to all its wings to be fully ready for any new instructions or orders that may be given to confront this strategic danger.”
Turkish president Recep Tayyip Erdogan said Trump has thrown the Middle East into a “ring of fire” while the country’s prime minister, Binali Yildirim, said the US “has pulled the pin on a bomb ready to blow in the region”.
A host of US allies have condemned the move and vowed not to follow the US in recognising Jerusalem as the Israeli capital.
France’s Emmanuel Macron, Germany’s Angela Merkel and Britain’s Theresa May have all condemned the move, with the after branding Trump’s announcement “unhelpful”.
Meanwhile, Turkish president Erdogan and Pope Francis have together agreed to avoid any changes to Jerusalem’s status.
Sources in Erdogan’s office said: “Emphasising that Jerusalem is sacred to Jews, Christians and Muslims, President Erdogan and Pope Francis stated that any attempt to change the city’s status should be avoided.”
Jerusalem is of huge importance to both Israel and the Palestinians and contains sites sacred to Judaism, Islam and Christianity.
Israeli sovereignty over Jerusalem has never been recognised internationally, and all countries maintain their embassies in Tel Aviv.