Right-wing pro-settler groups scrapped a controversial march that was to take place this week in Jerusalem, a spokesperson said, as Hamas warned of renewed violence if the event took place.
The so-called March of the flags was due to take place on Thursday and proceed through flashpoint spots in Israeli-occupied east Jerusalem.
News of its cancellation came as Khalil Hayya, a senior Hamas figure of the Palestinian group Hamas, warned the march could spark new violence. It was not clear if the cancellation was linked to his remarks.
"Police refused to give us authorisation," a spokesperson for one of the groups organising the march said, prompting a cancellation of the event.
Israeli police said in a statement that "the current route at this time is not approved", without adding that the march had been scrapped.
"We warn the occupation (Israel) against letting the march approach east Jerusalem and Al-Aqsa Mosque compound on Thursday," Hayya said.
"We hope the message is clear so that Thursday doesn't become (a new) May 10," he said, in about the start of last month's 11-day Israeli aggression on the Gaza Strip.
Right-wing organisers described the march as a routine demonstration of free expression, but many critics feared it could set a match to already inflamed tensions.
Israeli Defence Minister Benny Gantz had urged police to cancel it over concerns it could reignite fighting.
Thursday's march was set to pass through the Damascus Gate, where May clashes between anti-settlement demonstrators and Israeli security forces were a factor in fuelling the war.
A flag march scheduled for May 10 was quickly broken up that day after Hamas began firing volleys of rockets at Israel which responded with deadly air strikes.
That march was to mark "Jerusalem Day" and commemorate what Israelis consider as the "reunification" of disputed city following the 1967 Six-Day War, when it seized east Jerusalem before annexing it.
From May 10 to May 21 Israeli strikes on Gaza killed 260 Palestinians, including 66 children and some fighters, and wounded over 1,900 people, the Gaza health ministry says.
Rockets and other fire from Gaza have killed 13 people in Israel, including a child and an 1948 Palestinian-Arab teenager and an Israeli soldier, medics and the military say. Some 357 people in Israel were wounded.