Israeli police have rearrested a key Palestinian activist from a flashpoint district in east Jerusalem, in what rights groups on Friday said was part of a politically-motivated campaign.

"Jawwad Siyyam was arrested overnight following a complaint about aggression made by a Palestinian inhabitant of Silwan," Jerusalem police spokesman Shmulik Ben Ruby told AFP.

Siyyam is the director of the Wadi Hilwa community centre in Silwan, a crumbling, run-down neighbourhood which lies immediately south of Jerusalem's walled Old City, and is home to some 40,000 Palestinians.

Siyyam's detention late on Thursday came a day after the city's Magistrates Court ordered him released from almost three months of house arrest, an Israeli-Palestinian rights group familiar with the case said.

The Sheikh Jarrah Solidarity Movement described the move as "politically-motivated persecution" and said it was just the latest incident in what had been a months-long saga of systematic arrests and harassment of Siyyam, who is a key figure within a local anti-settlement protest movement.

Police first arrested him on January 4 on a claim of attacking a Palestinian man from the area, later releasing him to house arrest, with local officials saying his interrogation had been based on his political activities.

Around 400 Israeli colonizers live in Silwan and have often clashed with locals in unrest which peaked in September when an Israeli security guard shot dead a local resident whom he claimed attacked him.

Israel occupied east Jerusalem during the 1967 Middle East war and unilaterally annexed it shortly after. About 200,000 Palestinians live there.