BBC Correspondent Lyse Doucet reports from East Jerusalem

Scuffles broke out in the early hours of the morning as Palestinians attempted to prevent to prevent the settlers from occupying several buildings in the district of Silwan, a traditionally Arab part of the city.

A senior Palestinian official, Faisal Husseini, was among those slightly injured before Israeli troops intervened.

Earlier, about 15 settlers belonging to the ultra nationalist Jewish group El Ad occupied a house in the Silwan neighbourhood.

Legal dispute

The settlers say they had bought the house, outside the walls of the old city, nearly 10 years ago.

But Palestinian residents are reported to have challenged the legality of the transaction.

"There were legal discussions for many years ... and a few months ago the courts decided in our favour," El Ad member, Yehuda Amali told Israel Radio.

The Israeli Prime Minister Binyamin Netanyahu's office defended the settlers' position.

"They own the houses and this is an absolutely legal transaction," said David Bar-Ilan, an adviser to Mr Netanyahu. Asked whether the settlers would be removed, he said: "No".

Archaeological digs in East Jerusalem sponsored by Ateret Cohanim sparked clashes with Palesitinians last May

The ultra nationalist and religious group El Ad has already installed several Jewish families in the same area.

It is connected with the Ateret Cohanim organisation, which began digging on Sunday in the old city near Herod's gate, with a view to establishing a new settlement.

Israel occupied East Jerusalem in the 1967 War and later annexed it. It regards all of Jerusalem as its "united and eternal" capital.

Palestinians regard East Jerusalem as the capital of a future state. They say movement into the area by settlers preempts the outcome of negotiations on the final status of the city.