Israeli Prime Minister Benjamin Netanyahu says all of Jerusalem will always remain under Israeli sovereignty.
Mr. Netanyahu said united Jerusalem is the Jewish state's capital, and will never again be partitioned or divided.
The prime minister spoke Thursday on Jerusalem Day at a ceremony marking 42 years since Israel captured East Jerusalem from Jordan in the 1967 Six-Day War. Israel's annexation of East Jerusalem has not been internationally recognized, and Palestinians want East Jerusalem to be the capital of a future Palestinian state.
Palestinian officials rejected Mr. Netanyahu's remarks. Aides to Palestinian President Mahmoud Abbas said the declaration goes against a two-state solution and threatens the peace process.
In East Jerusalem Thursday, several hundred people protested against Jerusalem Day celebrations.
The demonstrators, many of whom were Arabs, waved Palestinian flags and shouted slogans condemning Israeli occupation of Palestinian territory.
In other news, Israeli soldiers and police dismantled a small Jewish settlement in the West Bank Thursday, days after U.S. President Barack Obama urged Mr. Netanyahu to halt settlement construction.
Israel has long promised to remove unauthorized settlements in the West Bank, but says hundreds of thousands of other Jewish settlers live in settlements "authorized" by the government.
Israel has occupied the West Bank since it seized the territory in the 1967 Six-Day War.
Also Thursday, a Palestinian police officer and two Israeli soldiers were wounded in a shootout in the West Bank town of Qalqilya.
Some information for this report was provided by AFP, AP and Reuters.