The senior cleric was detained near al-Aqsa Mosque after he led Friday prayers, Shafaqna news site reported.
Earlier in the day, he had told Maan news agency that Israeli forces had prevented him from entering al-Aqsa mosque at multiple entrances.
The Palestinian worshipers then held Friday prayers in streets near the mosque.
It was the first time since 1969 that Friday prayers were not held at the holy mosque.
It came after a shooting incident in Quds left at least three Palestinians and two Israeli police officers dead.
The incident took place on Friday morning close to Haram al-Sharif (Temple Mount).
The Israeli police claimed the Palestinian fatalities comprised "attackers,” who had fired at its forces before being shot themselves.
The Palestinian victims were identified as Muhammad Ahmad Muhammad Jabarin, 29, Muhammad Hamid Abd al-Latif Jabarin, 19, and Muhammad Ahmad Mufdal Jabarin, 19.
Sources also reported the apprehension of four Palestinian females at Bab al-Asbat (Lions’ Gates) in Quds’ Old City Walls, without characterizing the nature of the arrests.
The police then announced the closure of the al-Aqsa Mosque compound and prohibition of Friday prayers amid the tensions.
Haram al-Sharif is home to the al-Aqsa Mosque and the Dome of the Rock. The site is holy to both Muslims and Jews.
According to an agreement signed between the Tel Aviv regime and the Jordanian government — which administers Al-Aqsa Mosque — after Israel’s occupation of East Jerusalem al-Quds in 1967, visits to the compound by Israelis are permitted but non-Muslim worship is prohibited.
The occupied territories have already been the scene of increased tensions ever since Israeli forces imposed restrictions on the entry of Palestinian worshipers into the al-Aqsa Mosque compound in East Jerusalem al-Quds in August 2015.
Over 300 Palestinians have been killed by Israeli force since October that year, when the clashes intensified.