One recent autumn evening, under a full moon, a monument to tolerance was unveiled on a ridge high above this revered and contested city, sacred to Muslims, Christians and Jews. A soaring bronze column split down the middle, with a spindly, gilded olive tree reaching up through the chasm, it seemed to encapsulate both the promise and the fragility of peace in a city increasingly on edge.

The monument, the gift of a Polish billionaire, was erected on the invisible seam between one of the Arab neighborhoods of East Jerusalem and the predominantly Jewish West. At the ceremony, there were ethereal moments, suggestive of a greater harmony, as the strains of an orchestra mingled with the Muslim call to prayer from countless minarets.

But this has also been a site of tremendous discord, a tangible reminder of how fractured the city really is.

Down the slope lies Jebel Mukaber, a Palestinian neighborhood of East Jerusalem that Israel captured from the Jordanians in 1967. Last March, a gunman set out from here and headed to the Mercaz Harav Jewish seminary in the West. He sprayed the mostly teenage students there with automatic weapon fire, killing eight before being shot dead himself. It was the worst act of terrorism perpetrated in the city in four years.

The road in front of the monument was the scene of angry demonstrations then by Jewish religious nationalists, who demanded the demolition of the gunman’s family home.

In the months since, two Palestinians driving large construction vehicles and a third behind the wheel of a BMW have rammed vehicles and pedestrians in West Jerusalem, killing three Israelis and wounding scores, deliberately, according to the police. All the drivers, who were killed on the spot, were residents of East Jerusalem, including Jebel Mukaber. None were known to have had any strong political affiliations.

“We live in fear,” said an Israeli woman, Mazal Tzabah, 64, at a bus stop in Armon Hanatziv, the Jewish neighborhood bordering Jebel Mukaber. “We don’t know who is good from bad.”

About a quarter of a million Palestinians, mostly Muslim, live in the generally poorer and less developed Arab neighborhoods of East Jerusalem, making up a third of the city’s population. Almost 200,000 Jews live alongside them in a patchwork of new neighborhoods, like Armon Hanatziv, that have been built over the 1967 boundaries on territory the Palestinians demand as the capital of their future state.

Adding to the mélange, a number of Jewish housing projects have sprung up like minisettlements in existing Arab neighborhoods, including Nof Zion, a luxury apartment complex that is being marketed to religious Jews and that sits at the entrance of Jebel Mukaber. Meanwhile, an increasing number of Arab families are quietly moving into Jewish areas on both sides of the 1967 line.

The police report a sharp increase in the number of East Jerusalem residents arrested for involvement in violence or the planning of attacks in the past year. While the city has experienced worse violence, like the deadly bus and cafe bombings of previous years, most of those were carried out by Palestinians who came in from the West Bank.

Since Israel considers all of Jerusalem as its united, sovereign capital, there are no permanent barriers in the heart of the city; its Palestinian residents, unlike West Bankers, have free access to all parts.

In this tense arrangement, tolerance is often tested. When sectarian rioting broke out on Oct. 8 between Jews and Arabs in the mixed city of Acre in northern Israel, the police immediately went on high alert in East Jerusalem for fear the violence could spread.

Many Jewish residents say they live in trepidation. Arab residents charge that rather than trying to find a political solution for the city, Israel is trying to Judaize the eastern part and squeeze the Palestinians out.

Meaningful social interaction is rare. But even amid the rising antagonism, some are trying to reach across the psychological divide.

On Sept. 21, young Jewish and Palestinian musicians came together for a joint rock concert sponsored by the United States Consulate at the historic Y.M.C.A. building on King David Street — the site of one of the construction vehicle attacks in July — under the slogan “the mic is more powerful than the gun.”

One of the performers, Muhammad Mughrabi, 21, a rapper from the Shuafat refugee camp in East Jerusalem, says his friends there think it strange that he appears with Israelis.

“Until I was 15, all the Israelis I met were soldiers, and I was very afraid,” he said.

There are other examples of coexistence. Groups of Israeli and Palestinian women meet to discuss weight issues, brought together by an American-Israeli filmmaker who founded the project in 2006, making a documentary called “A Slim Peace.”

Ir Amim, an Israeli group that advocates an equitable political solution for Jerusalem, is offering tours of East Jerusalem to show Israelis what life looks like on the other side.

Beyond that, the Interreligious Coordinating Council in Israel has been organizing modest people-to-people exchanges between East and West Jerusalem for years.

Jerusalem is “a very weird city,” said Ron Kronish, the council’s director. “Life goes on, but the amount of separate living is staggering.”

He added, “The question is how do real people live amidst conflict, and how can you best mitigate it, meaning having a little less hatred.”

Yet the tensions persist. The night after the Y.M.C.A. concert, which ended with a warm if chaotic improvisation of Bob Marley’s “No More Trouble,” a 19-year-old from Jebel Mukaber took his brother’s BMW and rammed it into a group of off-duty soldiers and civilians, wounding several, outside the Old City at a point where the East meets West.

Mourners who gathered at his spacious family home were convinced that the youth, an inexperienced driver with no license, was involved in a simple traffic accident and was needlessly killed by one of the soldiers.

“All he cared about, as far as I know, was to have a nice car and listen to music,” said Omar Baidun, 45, a businessman and family friend.

Yet there were no doubts about the driver’s intentions in the Jewish neighborhood of Armon Hanatziv.

Dalia Ben Shitreet, 47, an Israeli hairdresser who lives on the outer rim of the neighborhood, only a street away from Jebel Mukaber, said that she was “for coexistence” and that some of her clients and occupants of her own apartment building were Muslim Arabs.

But she added that she was afraid to walk out at night; that Jebel Mukaber was “hostile” and should be “razed to its foundations — though I am sorry and ashamed to say it.”