Sky’s Middle East Correspondent Alex Rossi, who is in Ramallah, said “the air is thick with the smoke of burning tyres” – with ambulance crews arriving at the scene where people are using makeshift slings to throw stones at the Israeli defence forces.
“People here are now talking about the possibility of a third Intifada, the Arab word for an uprising,” he added.
Rossi described the situation on the ground as “extremely volatile” – adding that Israeli troops are firing tear gas and sponge bullets into the crowd.
Around a dozen people have suffered minor injuries in demonstrations in the West Bank, Palestinian officials say, with hundreds of protesters taking to the streets.
In Gaza, people burned posters of Donald Trump to protest against his decision to recognise Jerusalem as Israel’s capital and plans to move the US embassy from Tel Aviv to the city.
The US President went ahead with his Middle East policy shift, despite leaders from around the world warning Mr Trump it could increase tensions in the region and damage the Middle East peace process.
Palestinian President Mahmoud Abbas said he was rallying international opposition to what he called an “unacceptable crime”, adding there has been a “positive response” to his overtures.
In a rare public statement, Nobel laureate Desmond Tutu said “God is weeping over President Donald Trump’s inflammatory and discriminatory” decision and that it was duty of the world “to tell Mr Trump he is wrong”.
Ismail Haniyeh, leader of the Palestinian Islamist group Hamas, earlier called for a new uprising – with Israel’s army deploying reinforcements in the West Bank.
Hamas said the decision “opened the gates of hell” on US interests in the Middle East.
As both sides traded blows, Mr Trump was occupying himself by urging his Twitter followers to “go get the new book on Andrew Jackson” by Fox News presenter Brian Kilmeade. “Really good,” the commander-in-chief tweeted.
Saudi Arabia slammed the move as “irresponsible” and warned there will be violence – and Turkey’s President Recep Tayyip Erdogan warned that Mr Trump had put the Middle East into a “ring of fire”.
Turkey’s Prime Minister Binali Yildirim said the US had “pulled the pin on a bomb ready to blow in the region”.
Iran warned it would “provoke Muslims” and lead to an “increase in radical, angry and violent behaviour”.
British Prime Minister Theresa May said she disagreed with the move and said the status of Jerusalem “should be determined in a negotiated settlement” between both sides, adding it “should ultimately be the shared capital of the Israeli and Palestinian states”.
Foreign Secretary Boris Johnson told Sky News Arabia the UK had a “moral duty” to help resolve the dispute in Jerusalem, adding: “The US is the preeminent power that can now show leadership.”
The Kremlin said Mr Trump’s decision was causing a split in the international community, while France’s Emmanuel Macron described it as “regrettable”.
President Trump, however, has insisted his decision is simply “recognition of reality” and “the right thing to do”.
Changes around the sensitive city of Jerusalem – a holy site for Muslims, Jews and Christians – risk scuppering attempts by Mr Trump’s son-in-law Jared Kushner to broker an Arab-Israeli peace agreement.
Egypt, which was the first Arab nation to sign a peace treaty with Israel in 1979, also rejected the US President’s declaration, while Jordan dismissed it as “legally null” because it consolidated Israel’s occupation of East Jerusalem, which the Palestinians see as the capital of any future state.
The decision has been largely welcomed in Israel, which has long considered Jerusalem to be its capital, after it annexed the Old City in 1967.
Israeli Prime Minister Benjamin Netanyahu praised America’s “courageous and just decision” and said it was a “historic day”.
Following the decision, American government personnel have been warned to avoid the Old City and the West Bank until further notice.
An updated “Worldwide Caution” has also been issued to US citizens abroad, advising them to “be alert to the possibility of political unrest, violence, demonstrations, and criminal activities”.