Mohammed al-Khayat, whose family owns three apartments in one Silwan building, told AFP settlers had broken the locks on empty properties and then changed them.
A police spokeswoman said clashes flared later when one Palestinian man tried to get into one of the buildings.
She said the properties belonged to settlers, who had presented documents proving they had purchased them.
Elad, a hardline settler organisation that seeks to increase Jewish settlement in Israeli-annexed east Jerusalem, told AFP that a company called Kendall Finance had purchased the properties.
But Mohammed Dahla, a lawyer representing the Palestinian owners, said they denied selling them.
A spokesman for Palestinian president Mahmud Abbas, quoted by news agency Wafa, slammed “the occupation by settlers of buildings in Silwan close to the Al-Aqsa mosque.”
Silwan, an Arab neighbourhood were a few hundred hardcore settlers live, is often the scene of violence between the two sides, or between young Palestinians and police.