Palestinian minister for Jerusalem affairs Fadi al-Hadami was detained and was being questioned for "activities in Jerusalem," Israeli police spokesperson Micky Rosenfeld told AFP.
Hadami's arrest was most likely due to recent activities that have included accompanying Chile's president during a visit to Al-Aqsa Mosque complex, a source close to the minister said.
On Tuesday, Hadami was seen alongside Chilean President Sebastian Pinera on a tour of the flashpoint holy site, enraging Israel, which claimed it constituted a violation of regulations.
The arrest follows days of violent unrest in al-Quds.
Overnight Saturday, Israeli police arrested several Palestinians in the East Jerusalem neighborhood of Issawiya.
The continued unrest follows the shooting of a 20-year-old Palestinian in Issawiya by Israeli police.
The young man, identified as Mohammed Obeid, died of his wounds, according to the Palestinian health ministry.