Israel arrested at least three Jewish militants on suspicion they were planning to attack Jerusalem's al-Aqsa mosque compound, police have said.
Temple Mount is probably the most hotly disputed site in the conflict
Officials said the men detained in April admitted the plot to try to stop Israel's withdrawal from Gaza.
The men allegedly planned to fire anti-tank missiles at the Eighth Century mosque - built on land Jews revere as the Temple Mount.
But a lawyer for the men - now freed - said there was never was a plot.
Police said that the men would not be charged because no part of the plan was carried out.
'Lack of seriousness'
The top Palestinian cleric in Jerusalem accused Israel of conspiring with Jewish militants.
"How can they be released when they are planning to attack the al-Aqsa Mosque? There is complicity and a lack of seriousness," said Sheikh Ekrima Sabri in remarks to the AFP news agency.
"Police should arrest these extremists and put them in preventive custody to ensure they don't carry out such acts," he added.
Israel's justice ministry said it had weighed the evidence but decided the case was unlikely to hold up in court.
"There was no evidence the suspects committed any crime, and it appears they changed their minds and dropped the plan even before they were arrested," a ministry statement said.
The Temple Mount is probably the most hotly disputed site in the whole Arab-Israeli conflict.
For Muslims it is closely association with the Prophet Muhammad and known as the Haram al-Sharif, or the Noble Sanctuary. Jews believe it to be the site of the Temple of Solomon in Biblical times.
A visit to the compound by then-opposition leader Ariel Sharon in September 2000 helped to spark the latest Palestinian uprising, or intifada.
Jews opposed to the planned Gaza pullout have threatened to attack or storm al-Aqsa, to divert official resources away from evacuating the settlers.
Prime Minister Sharon's plan envisions the removal of all 8,000 settlers and the troops who protect them from Gaza as part of a unilateral security move.
Israel will keep control of Gaza's borders, airspace and coastline. In addition four small settlements in the northern West Bank will be removed.