The international community has warned Israel against expelling Palestinian leader Yasser Arafat, after Israel vowed to "remove" him from the area.
A seemingly unperturbed Arafat blew kisses to the throng below
The United States said expelling Mr Arafat would be unhelpful, while Russia - a co-sponsor of the roadmap peace plan - said such a move would be a "grave mistake".
The Israeli cabinet decided in principle on Thursday night to expel Mr Arafat following two suicide bombings in Jerusalem and Tel Aviv, which killed 15 people.
Amid rising tension, Israeli police entered a holy site in Jerusalem on Friday, firing tear gas and stun grenades to disperse Palestinians who were throwing stones.
"After Friday Muslim prayers, Palestinians - mostly youngsters - threw heavy rocks and blocks towards Jews praying at the Western Wall. A police unit went in," police spokesman Gil Kleiman said.
There were no reports of injuries at the site which Muslims call the Haram al-Sharif and Jews
revere as the Temple Mount.
Responding to the Israeli decision, Mr Arafat told a crowd of hundreds of supporters in Ramallah on Thursday that he would never leave what he called his homeland.
The Palestinian Prime Minister-designate, Ahmed Qurei, reacted to the news by announcing he was suspending his bid to form a new government, saying that Israel's decision threatened the stability of the entire region.
The BBC's James Reynolds in Jerusalem says political sources in Israel say they do not expect Israel to carry out its threat immediately.
But, he says, it looks like Israel's decision has effectively put efforts to restart the roadmap on hold.
In a show of support, huge crowds gathered at Mr Arafat's battered compound in the West Bank and there were similar scenes in the Gaza Strip where thousands took to the streets.
Mr Arafat appeared on the steps of his office to acknowledge them, urging Palestinians to resist any attempt to remove him and blowing them kisses.
"You are brave people, my loved ones. Abu Ammar is staying here," he said, using his nom de guerre.
The BBC's David Chazan in Jerusalem says Mr Arafat is clearly revelling in the international attention he is getting.
Senior Palestinian officials have warned Israel not to implement its decision, describing the possible consequences as catastrophic.
Mr Arafat's Fatah movement urged Palestinians to mount a round-the-clock guard at the headquarters to block any Israeli moves to remove Mr Arafat forcibly.
Israel's announcement has provoked a chorus of disapproval around the world.
US State Department spokesman Richard Boucher said: "We think that it would not be helpful to expel [Arafat] because it would just give him another stage to play on".
"The Israeli Government is very clear on what our views are on these things and I think understands clearly our
The US ambassador to Israel, Dan Kurtzer, put the White House view to Israeli Defence Minister, Shaul Mofaz, in person on Friday.
Our correspondent says the Americans are concerned that anger at Mr Arafat's expulsion would reverberate throughout the Muslim world and hinder US foreign policy, especially in Iraq.
Elsewhere, Egyptian President, Hosni Mubarak urged Israel not to proceed, saying the Palestinian president was crucial to peace moves.
A spokesman for the European Union said expelling Mr Arafat would be a "terrible mistake that would have serious consequences across the whole region".
Our correspondent says Israel's decision to expel Mr Arafat makes for a fairly dramatic change of policy.
Previously, it had regarded him as irrelevant and taken steps to isolate him in his headquarters.
Since December 2001 the Israeli army has largely confined Yasser Arafat to his compound in Ramallah.
Israeli media reported several months ago that commandos have been training to grab Mr Arafat at his compound, bundle him onto a helicopter and fly him away, possibly to North Africa.
The Israeli newspaper Yediot Ahronot quoted an unnamed Israeli official as saying: "It was taken into consideration that there would be armed resistance, so preparations have been made to silence the opposition - but there will be a fight."