The international Red Cross has privately accused Israel of reshaping Jerusalem to further its own interests, in violation of international law.
Israel has built an outer ring of settlements around East Jerusalem
A leaked ICRC report says Israeli policy has far-reaching humanitarian consequences for Palestinians living under occupation in East Jerusalem.
Israel captured East Jerusalem in 1967, and the territory is regarded as occupied land under international law.
But Israel rejects this, and says the report's premise is, therefore, wrong.
The report says Israel shows "general disregard" for its obligations under international humanitarian law and the law of military occupation in particular.
Violations that change the status of East Jerusalem include the West Bank barrier, an outer ring of Jewish settlements around the city and roads to connect Israeli districts and settlements, the report says.
An ICRC spokesman confirmed that leaked quotations in a US newspaper were from a confidential report transmitted in February 2007 to Israel and some other governments.
The leak comes a day before Israel marks 40 years, according to the Jewish calendar, since its capture of East Jerusalem from Jordanian control, in the 1967 war.
"We reject the premise of the report," said Israeli foreign ministry spokesman Mark Regev.
"East Jerusalem is not occupied land, it is part of Israel. All people there were offered full Israeli citizenship."
Israel's unilateral moves in Jerusalem have been condemned by several UN Security Council Resolutions.
US and EU ambassadors have boycotted ceremonies in the run-up to Israel's Jerusalem Day on Wednesday, arguing that the status of the city should be determined by negotiations with the Palestinians.