The arrest drew condemnation from Jordan, the custodian of the Al-Aqsa mosque compound, in the disputed city.
Israeli police spokesman Micky Rosenfeld said Abdel Azeem Salhab had been arrested for violating an order preventing entry into a prohibited area of the holy site.
Salhab is the head of the council of the Waqf in Jerusalem, the religious authority that governs the site.
Official Palestinian news agency WAFA reported that his deputy Najih Bakira was also arrested, but police had not confirmed it.
The arrests follow the detention of 60 others overnight Thursday to Friday as police said they were responding to calls for unrest at the holy site surrounding Friday prayers there.
Some have since been released with an order not to visit the holy site.
The site is the third-holiest in Islam and a focus of Palestinian aspirations for statehood.
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It is also the location of Judaism's most holy spot — Jews refer to it as the Temple Mount -- and a frequent scene of conflict between the two sides.
Muslim worshippers' access to Al-Aqsa and the adjoining Dome of the Rock is controlled by Israeli security forces.
A statement from Jordan's religious affairs minister, Abdul Nasser Abu al-Basal, said the arrests were "playing with fire" at the sensitive holy site.
There have been scuffles there in recent days after Israeli authorities padlocked a door, known as the Golden Gate or Gate of Mercy in Arabic, to disused offices.
The offices were closed by an Israeli court order in 2003, police say, but video posted on social media showed Muslim officials praying there recently in defiance of the court ban.
The religious site is located in east Jerusalem, occupied by Israel in the 1967 Six-Day War and later annexed in a move never recognised by the international community.
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