More than a dozen people were injured when Israeli police confronted Palestinian protesters in a refugee camp at the edge of Jerusalem on Monday, violence stoked by rising tensions over a stalemate in peace talks.

The Palestinian cabinet "strongly condemned" what it called an Israeli incursion and its senior officials said negotiations with Israel could resume only if they focused on borders and other core conflict issues and set out a clear deadline.

Citing biblical roots to the city, Israel regards all of Jerusalem as its "indivisible and eternal capital", a claim that has not been recognised internationally.

Palestinians want East Jerusalem, annexed by Israel after the 1967 conflict, to be the capital of the state they hope to establish in the West Bank and Gaza Strip.

Israeli and Palestinian protesters have squared off on a weekly basis in the past few months during generally peaceful demonstrations staged against Israel's recent seizure of homes inhabited by Palestinians in parts of East Jerusalem.

Israeli Prime Minister Benjamin Netanyahu, who under U.S. pressure ordered a limited settlement freeze in the occupied West Bank, has refused to heed Palestinian demands to halt the construction of homes for Jews in East Jerusalem.

In a move that may exacerbate tensions further, Israel's state planning commission has scheduled a hearing to approve the expansion of a Jewish settlement in the mostly Palestinian section of Silwan, Israel's Channel One television reported.

The dispute over Jerusalem took a violent turn when Palestinian schoolchildren threw rocks at Israeli police vehicles heading into Shoafat Refugee Camp on Monday, injuring four officers, an Israeli police spokesman said.

Police had launched the raid to arrest what Israel said were municipal tax evaders. Palestinian officials said 10 Palestinians were injured in the confrontation, none seriously.

The Palestinian cabinet said in a statement it "strongly condemned the Israeli incursion and military operation" into three Palestinian neighbourhoods in East Jerusalem, in which it said dozens were also arrested.

In Tokyo, Palestinian Foreign Minister Riad Malki said any renewed peace talks with Israel, which have been stalled since the launching of a three-week Gaza war in December 2008, must focus on border issues and set a deadline of four months.

"Proximity talks should focus on one issue only. That issue is borders," Malki said, responding to a U.S.-backed proposal to resume negotiations with Israel on an indirect basis.

Israel has agreed to the formula but Palestinian President Mahmoud Abbas says he will announce a decision after hearing answers to some questions he has put to Washington.

Abbas has made any resumption of peace talks conditional on Israel halting Jewish settlement building in occupied land, and rejected a temporary construction freeze ordered by Israel in as insufficient, particularly for excluding Jerusalem.

Separately, the Israeli military carried out arrests in the West Bank, and detained the wife of the mayor of the town of al-Bireh, charging involvement in the Islamist Hamas movement.

Israel's Supreme Court ordered two pro-Palestinian foreign activists freed on bail, saying immigration officers overstepped their authority by detaining Spaniard Ariadna Jove Marti and Australian Bridgette Chapell outside Israel, in the West Bank. (Additional reporting by Erika Solomon, Mohammed Assadi and Tom Perry in Ramallah; Editing by Jon Boyle) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to http://blogs.reuters.com/axismundi)