Adnan had been released from jail on Sunday after being held for a year under administrative detention, which allows imprisonment without charge for renewable periods of six months indefinitely.
Read: Israel frees Palestinian after 56-day hunger strike
Israel, which says Adnan is a member of Islamic Jihad, rearrested him on Monday but released him several hours later, police said.
He was sent back to the West Bank, where his home village is located.
"Khader Adnan was arrested because he had no right to be in the Old City of Jerusalem where free access is allowed to West Bank Palestinians only aged 50 and above, and he is just 37," police spokeswoman Luba Samri told AFP.
Micky Rosenfeld, another police spokesman, said Adnan was "an Islamic Jihad activist and was also prohibited for this reason from entering Israeli territory".
Israel considers the Islamic Jihad group a "terrorist" organisation.
Officials with the Palestinian security services said Adnan was arrested while travelling to the Al Aqsa mosque compound, the third holiest site in Islam, for a special ceremony during the sacred fasting month of Ramazan.
Israel has strict regulations on Palestinians from the occupied West Bank entering Jerusalem.
On Sunday, Adnan had been given a hero's welcome in his village near Jenin in the northern West Bank with fireworks, songs and flags flying for Islamic Jihad.
Read: Israel to free Palestinian hunger striker: lawyer
The bespectacled 37-year-old, thin and with a long beard, was released before dawn on Sunday after his jail protest against a controversial procedure allowing indefinite detention without charge.
Of the 5,686 Palestinian prisoners currently held by Israel, 379 are detained under administrative detention, according to Israeli figures.
His hunger strike, which brought him near death before it concluded last month, had sparked warnings from the Palestinian government that it held Israel responsible for his fate.
Regular protests were organised in his support.
Adnan ended his protest on June 28 after Israel agreed to release him, at which point he was transferred to an Israeli hospital.
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