Palestinian president Mahmoud Abbas says the Palestinian leadership will "freeze contacts" with Israel "on all levels".
Mr Abbas made the announcement during a meeting late on Friday with senior Palestinian officials to discuss the growing escalation over a major Jerusalem shrine.
It was not immediately clear if this means the Palestinians are halting their long-standing security coordination with Israel.
Three Palestinians were killed and dozens taken to hospital in clashes in Jerusalem and the West Bank earlier Friday.
The protests were triggered by Israel's installation of metal detectors at the shrine, revered by Muslims and Jews.
Muslim leaders allege Israel is trying to encroach on Muslim rights at the shrine, a claim Israel denies.
Israel installed the metal detectors after a deadly attack by Arab gunmen who killed two Israeli policemen.