The dispute centres on the spring of Gihon, an ancient water source which runs through a 500-yard-long tunnel just to the south of the site of the Jewish and Muslim holy shrines of Temple Mount, known to Muslims as the Haram al-Sharif, the Noble Sanctuary.
The East Jerusalem Development company, whose opening of the Hasmonean tunnel led to the fighting in September, has posted armed guards and started to collect an entrance fee at the spring. The Islamic authorities say that ownership of the site, beside a disused mosque, belongs to them.
The struggle for control of the spring and the tunnel to which it leads is already exacerbating the battle for Jerusalem which Israelis and Palestinians both claim as their capital. Benjamin Netanyahu, the Israeli Prime Minister, says he will not compromise Israel's claim to sovereignty over the city in negotiations on its final status due to start this year.
Adnan Husseini, the director of the Islamic Waqf, which looks after Muslim holy sites in Jerusalem, says that the East Jerusalem Development company, owned by the Israeli tourism ministry and Jerusalem municipality, has "barely finished one tunnel and here it is starting up another". He says he will close the entrance to the spring if they do not withdraw.
Yoel Marinov, director of East Jerusalem Development, says he is mystified by the fuss. He says: "It is bizarre and ridiculous. We cleaned out the tunnel at a cost of 1 million shekels [pounds 330,000]. It was neglected and full of filth. Somebody should provide security in a sensitive area." As with the opening of the Hasmonean tunnel, half a mile to the north, Mr Marinov says he is interested in tourism and not in politics.
Palestinians in Silwan see his company as part of many-fronted Israeli efforts to displace them.
Last year Ehud Olmert, the right-wing mayor of Jerusalem, opened a festival known as Jerusalem 3000, celebrating the capture of Jerusalem by King David in Silwan. Teddy Kolek, the previous mayor, said it was tactless "to locate the festival in a largely Arab area. The celebration has become a political and chauvinistic business".
The presence of a never-failing water supply from the Gihon spring was the reason Silwan was chosen as the place to build the first city of Jerusalem in about 1800BC. Eight hundred years later, it was captured by King David. To resist an impending siege by the Assyrians King Hezekiah cut a tunnel through the rock to divert the spring into the pool of Siloam within the city walls.
Palestinians remain in control of the pool, known to Christians as the place where Jesus cured a man blind from birth, which is surmounted by the minaret of a mosque. Mr Husseini claims, however, that elsewhere the Israeli company is taking over. He says: "They said to me: `You keep the tunnel and we will take the pool and the tunnel'."
In Silwan, villagers say they feel under pressure.
In the Old City, Jewish settlers have had only intermittent success in displacing Palestinians. But in Silwan, along the spur of land which is the site of what Israelis call the City of David, Jewish settlers, belonging to a militant organisation called Elad, have been more successful.
In 1991, Elad seized five Palestinian-owned houses in a night.
Mute for four years under the Labour government, the organisation celebrated the election of Mr Netanyahu in May by taking over a Palestinian house in Silwan on the day the poll results were announced.
Elad has since started a large-scale construction project beside Gihon, the exact purpose of which is unclear, giving them control of much of the area around the spring.
Palestinians say they feel deeply threatened.
Although an Israeli government inquiry, known as the Klugman report, found that the houses taken over by Elad in 1991 were seized illegally, or with government funds illegally obtained, the settlers have not been removed.
The houses they hold in Silwan have been turned into fortresses, protected by barbed wire entanglements and submachine guns. Elad says it has acquired rights to another 20 houses in Silwan.
Mohammed Hussein Sirhan, of the Palestinian residents' committee, shows photographs he has taken of Palestinian houses being demolished and the construction work being carried out by Elad.
He says: "They say they are looking for antiquities, but in fact they are putting up a new building."
The activities of Mr Marinov's company and Elad are together slowly squeezing Palestinians out of that part of Silwan.
So far, reaction has been limited. But the tunnel in Silwan could yet lead to violence similar to that provoked in September by the the tunnel under the Old City.Reuse content