An extraordinary row has broken out between Elie Wiesel, the Holocaust survivor, author and Nobel peace prize winner, and a group of Jewish residents of Jerusalem over who speaks for the future of the disputed city.

Wiesel prompted the argument with an open letter to Barack Obama appealing for him not to "politicise" differences over Jerusalem by pressing Israel to stop Jewish settlement construction there. In a reflection of the divisions that sometimes exist between Jews who live in the city and those who idealise it from afar, 100 Jewish residents have responded with their own open letter expressing "outrage" at Wiesel's call, and accusing him of sentimentality and falsely claiming that there is no discrimination against Jerusalem's Arab population.

Wiesel, who lives in the US, made the appeal to Obama in adverts in American newspapers last month.

"For me, the Jew that I am, Jerusalem is above politics," he wrote. "It belongs to the Jewish people and is much more than a city, it is what binds one Jew to another in a way that remains hard to explain. When a Jew visits Jerusalem for the first time, it is not the first time; it is a homecoming. The first song I heard was my mother's lullaby about and for Jerusalem. Its sadness and its joy are part of our collective memory." He went on to appeal to Obama not to press Israel on the issue of Jerusalem.

"Pressure will not produce a solution. Is there a solution? There must be, there will be. Why tackle the most complex and sensitive problem prematurely?" he asked. "Jerusalem must remain the world's Jewish spiritual capital, not a symbol of anguish and bitterness, but a symbol of trust and hope."

The 100 Jewish Jerusalemites, who include academics and political activists, responded in a letter in the New York Review of Books this week that expressed "frustration, even outrage" at Wiesel's claims and at being "sacrificed for the fantasies of those who love our city from afar".

"We cannot recognise our city in the sentimental abstraction you call by its name," they wrote. "Your Jerusalem is an ideal, an object of prayers and a bearer of the collective memory of a people whose members actually bear many individual memories. Our Jerusalem is populated with people, young and old, women and men, who wish their city to be a symbol of dignity – not of hubris, inequality and discrimination. You speak of the celestial Jerusalem; we live in the earthly one."

The writers accused Wiesel of being blind to history and the realities of life in Jerusalem today, including systematic discrimination against the Arab population and the efforts of "crafty politicians and sentimental populists" frantically trying to Judaize the Arab areas of the city "in order to transform its geopolitics beyond recognition".

"Your claim that Jerusalem is above politics is doubly outrageous. First, because contemporary Jerusalem was created by a political decision and politics alone keeps it formally unified. The tortuous municipal boundaries of today's Jerusalem were drawn by Israeli generals and politicians shortly after the 1967 war," they wrote.

The writers added that by grabbing Palestinian land and villages and incorporating them into a greatly expanded Jerusalem, the Israeli government created "an unwieldy behemoth" larger than Paris.

"Now they call this artificial fabrication 'Jerusalem' in order to obviate any approaching chance for peace," they said. The writers tartly noted that Wiesel chooses not to live in the city he claims such attachment to.

"We prefer the hardship of realizing citizenship in this city to the convenience of merely yearning for it," they said.

Last month, a former Israeli cabinet minister, Yossi Sarid, responded to Wiesel with an open letter in which he said the author had been "deceived" into believing that all the city's residents live freely and equally. He took Wiesel to task for claiming that Arabs were free to build anywhere in Jerusalem. The city's Arab residents face routine obstacles to obtaining planning permission to build in the east and almost never receive authorisation for the west. "Not only may an Arab not build 'anywhere', but he may thank his God if he is not evicted from his home and thrown out on to the street with his family and property," Sarid wrote.

He pointed to Arabs forcibly removed to make way for Jews.

"Those same zealous Jews insist on inserting themselves like so many bones in the throats of Arab neighbourhoods, purifying and Judaizing them with the help of rich American benefactors, several of whom you may know personally," Sarid wrote. "Barack Obama appears well aware of his obligations to try to resolve the world's ills, particularly ours here. Why then undercut him and tie his hands?"

Extract from open letter to Obama from Elie Wiesel

"For me, the Jew that I am, Jerusalem is above politics. It is mentioned more than six hundred times in Scripture – and not a single time in the Koran. Its presence in Jewish history is overwhelming.

"Today, for the first time in history, Jews, Christians and Muslims all may freely worship at their shrines. And, contrary to certain media reports, Jews, Christians and Muslims ARE allowed to build their homes anywhere in the city. The anguish over Jerusalem is not about real estate but about memory."

Extract from open letter from 100 Jewish Jerusalemites to Wiesel

"Your letter troubles us, not simply because it is replete with factual errors and false representations, but because it upholds an attachment to some other-worldly city which purports to supersede the interests of those who live in the this-worldly one.

"We invite you to our city to view with your own eyes the catastrophic effects of the frenzy of construction. You will witness that, contrary to some media reports, Arabs are not allowed to build their homes anywhere in Jerusalem. You will see the gross inequality in allocation of municipal resources and services between east and west."