A small right-wing demonstration organised by the Betar movement took place outside Orient House on Friday, the unofficial east Jerusalem headquarters of the Palestinian Authority.
Israel took over the headquarters and other Palestinian institutions following two suicide bombs last week.
The demonstrators waved banners and chanted slogans demanding Israeli Prime minister Ariel Sharon be tougher on the Palestinians.
Border police had to intervene after one of the protestors threw a lit cigarette through the window of a passing Palestinian car.
The driver got out and began remonstrating with the protestors and border police moved in to separate the two sides.
The Palestinian man was led away by police.
Also on Friday, the Israeli military stepped up security around Jerusalem after receiving what it said were intelligence reports of plans for major terrorist attacks in both Jerusalem and Northern Israel.
From Thursday afternoon, the West Bank town of Ramallah was closed off by Israeli troops- due to the alerts about a possible attack in Jerusalem.
Cars heading from Ramallah toward Jerusalem were turned back.
Palestinian sources said that the Israeli army had also blocked the northwest exit from Bethlehem toward Jerusalem.