The Islamic endowment that runs the site said Israeli police entered in force before dawn on Friday, as thousands of worshippers were gathered at the mosque for early morning prayers.
Photos and videos circulating online showed Palestinians throwing rocks and police firing tear gas and stun grenades. Others showed worshippers barricading themselves inside the mosque amid what appeared to be clouds of tear gas.
The Palestinian Red Crescent emergency service announced it evacuated the majority of the wounded to hospitals.
The endowment stated one of the guards at the site was shot in the eye with a rubber bullet.
The Palestinian Red Crescent added that Israeli forces had hindered the arrival of ambulances and paramedics from reaching the mosque, as Palestinian media said that dozens of injured worshippers remained trapped inside the compound.
Israeli police forces said they arrested at least 300 Palestinians during the latest escalation.
Israeli police announced they entered the compound, the third holiest site in Islam and revered by Jews as the Temple Mount, to break up a “violent” crowd that remained at the end of the morning prayers.
They added they went in “to disperse and push back” the crowd after a group of Palestinians began throwing rocks towards the nearby Jewish prayer space of the Western Wall.
Reporting from Damascus Gate, Al Jazeera’s Najwan al-Samri said Israeli police forces stormed the Al-Aqsa Mosque compound without pretext and assaulted worshipers near the Qibly prayer hall following the morning prayer.
She added that the escalation came as far-right Jewish groups called for raids of the Al-Aqsa Mosque compound during the Jewish Passover holiday, and the offering of animal sacrifices in its courtyards, which has not occurred since ancient times.
Tensions have escalated in recent weeks. Israel has been carrying out arrests and military raids in the illegally occupied West Bank, in the wake of a series of deadly attacks by Palestinians inside Israel, setting off clashes in which several Palestinians have been killed, including seven since Wednesday.
Tens of thousands of Palestinians are expected to gather at Al-Aqsa for Friday prayers, as Muslims observe the holy month of Ramadan. Weeks of protests and raids on Al-Aqsa during Ramadan last year escalated into an 11-day assault on the besieged Gaza Strip.
The war led to the deaths of at least 232 Palestinians, as well as 12 Israelis, and significant destruction to the already impoverished territory.
Ramadan this year coincides with the Jewish Passover holiday and Christian holy week, bringing thousands of pilgrims and other visitors to Jerusalem.