Palestinians view Orient House as a key symbol
Officers barricaded access and forced back about 100 furious protesters, including the prominent Palestinian politician Hanan Ashrawi.
The demonstration came as Yasser Arafat issued a plea for international pressure on Israel to end its occupation of the building.
Yasser Arafat has written to world leaders asking them to intervene urgently, and accusing the Israelis of breaking the terms of the two sides' 1993 peace accord.
Mr Arafat has sent his letter to the presidents of the United States, Russia and China, as well as to the United Nations and the European Union, according to a spokesman, Saeb Erekat.
"He accompanied these messages with a copy of a letter in which Israel commits itself not to attack Palestinian institutions in East Jerusalem," Mr Erekat said.
Protests
Other Palestinian leaders have also warned the occupation of the house would escalate the conflict.
The West Bank leader of Mr Arafat's Fatah movement, Marwan Barghouti, declared a general strike for Monday in the Palestinian territories to denounce the seizure of Orient House.
He urged Muslims and Arabs throughout the world to join the protests.
During Saturday's demonstration, police wrestled some protesters to the ground, ripped up their signs and made several arrests.
Speaking to reporters later Hanan Ashrawi said: "They use force, we use civilised actions."
"We have the right to go to the Orient House. We have the right to go anywhere we want in Palestine, including Jerusalem."
The Israeli authorities have accused Mrs Ashrawi of inciting violence and warned they were considering measures to ban her from entering Jerusalem, Israel public radio said.
Hospital officials in Gaza say two Palestinians shot and wounded on Friday by Israeli troops have died. Reports say the Israelis fired live rounds during the clash near the Karni crossing.
Earlier, US President George W Bush expressed his frustration at the cycle of violence, saying both Israel and the Palestinians had to do more to break it.
He urged Mr Arafat to take action to apprehend those behind Thursday's suicide bomb.
'Escalation'
But the US State Department has criticised Israel for seizing Palestinian political institutions in and around Jerusalem, calling the move "a serious political escalation" of the conflict.
Reports say Israeli Prime Minister Ariel Sharon is refusing to hand back Orient House, which Israeli forces took over early on Friday morning.
The Israeli flag flew from its roof for most of Friday, a highly provocative gesture.
Israeli Government spokesman Dore Gold says Israel's actions showed Mr Arafat that attacks by Palestinian militants would result in "political reverses".
Most of the victims of Thursday's bombing were buried on Friday, including five members from one family who were buried in Jerusalem's main cemetery.