It is likely to be the most serious test of the joint security arrangements underpinning the Israeli-Palestinian accord on self-rule.
The withdrawal was to have been the second in a series of three Israeli pullbacks under the 1995 Israeli-Palestinian self-rule accord.
Such scenes were supposed to have been banished forever by the Israeli-Palestinian accords.
Under the Israeli-Palestinian interim self-rule accords, the authority cannot operate in Jerusalem.
The Israeli-Palestinian accords leave the status of Jerusalem and other core issues to negotiations on a permanent peace settlement.
"I don't feel this peace," she said of the Israeli-Palestinian accord signed five years ago.
A leaflet distributed by the group condemned the Israeli-Palestinian accord as the "peace of the dead."
After the Israeli-Palestinian accord was signed, foreign donors pledged $2.5 billion in aid for five years.
Officials coordinating the aid effort here warned that the Israeli-Palestinian accord could unravel if it loses financial support.
The Government also argued that the development was not in violation of any Israeli-Palestinian accords.