Dozens of families in the four towns — Abu Dis, Izzariyeh, Tsur Baher and Al-Sawahreh Al-Sharkia — received confiscation notices late last week, said Kalil Tufakji, a Palestinian cartographer.
Meanwhile, an Israeli official said a Jerusalem holy site closed to non-Muslims for most of the past three years — after a visit by Prime Minister Ariel Sharon sparked violence — will reopen by the end of the week.
Islamic Trust officials, who administer the ancient hilltop, were upset over the Israeli government decision, saying they were not consulted.
The shrine is revered by both Muslims and Jews.
Home of the Al Aqsa Mosque and the Dome of the Rock shrine, it is called Haram as-Sharif, or Noble Sanctuary, by Muslims, who venerate it as their third-holiest place after Mecca and Medina. Jews refer to it as the Temple Mount and revere it as the location of the biblical Jewish temples.
Also Tuesday, Haaretz newspaper reported top security officials have decided Israel probably will hand over the West Bank cities of Qalqilyah and Jericho to Palestinian Authority security control this week.
Israel had wanted the Palestinian suspects in those cities to be arrested first by the Palestinian Authority, but now apparently has backed off that demand.
The notices received by the Palestinians living near Jerusalem warn electronic fencing would be put up in that area, Tufakji said. Once the fence is completed, tens of thousands of Palestinians will have to use just one road — manned by Israeli soldiers — to get in and out of the fenced-in area, he added.
"This means that all these villages on the outskirts of Jerusalem will be isolated and the only way to move outside them or to enter them will be through a couple of Israeli checkpoints," Tufakji said. "Under the umbrella of security, Israel is implementing its political plan to isolate villages around Jerusalem and to turn them into isolated cantons."
The Israeli Defense Ministry confirmed the expropriation notices have been sent, but would not say how much land was taken.
Israel built a concrete wall between the towns and Jerusalem more than a year ago, already separating residents from the eastern sector of the city, the main commercial hub for Palestinians in those areas.
The wall increased the travel time between the towns and east Jerusalem from about 5 minutes to an hour and sometimes longer. The new electronic fence will make it almost as difficult for them to get into the West Bank.
An Israeli security source, who spoke on condition of anonymity, confirmed Israel had distributed the confiscation orders. The entire barrier in that area will cover some 8.4 miles, the source said, adding that if there are no court appeals, construction can begin within a month.
Israel's plan to build a barrier — a series of massive cement walls, electronic fencing, barbed wire and trenches — between the West Bank and Israel in an attempt to prevent suicide bombers from launching attacks, has outraged Palestinians. Parts of the barrier have already been completed, and residents of the town of the West Bank town Qalqiliya are now surrounded by a massive, gray cement wall.
President Bush opposes Israel's plan to build the barrier, especially as Israel and the Palestinians are trying to implement a U.S.-backed "road map" to peace.
In July, Israeli police began escorting small groups of tourists, including Jews, onto the site in the walled Old City, including Jews.
The visits last month by small groups of tourists, escorted by Israeli police, drew protests from Muslim leaders, and police halted the tours a few days later citing "tactical" problems. However, Israel's Public Security Ministry, which oversees security at Jerusalem's shrines, has since decided to resume the visits of non-Muslims.
"The Temple Mount will open this week," ministry spokesman Yehoshua Bauer said.
Mufti Ikrima Sabri, the top Muslim cleric in the Holy Land, said only the Waqf has the authority to allow non-Muslim visitors onto the site and criticized the ministry announcement.
In a meeting Monday with U.S. Sen. John McCain, Palestinian Prime Minister Mahmoud Abbas expressed his displeasure with Israel's decision to go ahead with the barrier, which Palestinians fear will be used as a final border during statehood negotiations.
According to the minutes of the meeting, Abbas told McCain: "This is threatening the final agreement between the two sides. It separates the Palestinian lands from each other and sabotages the vision of President Bush to establish an independent Palestinian state near the state of Israel."
Meanwhile, efforts to implement the internationally backed "road map" hit other roadblocks as Israel and the Palestinians struggled to agree to terms under which Israel would withdraw from Qalqiliya and Jericho.
Palestinians are insisting Israel remove checkpoints outside the West Bank towns, while Israel is demanding the Palestinians set up a detailed plan for keeping tabs on militants whom they refuse to arrest for fear of sparking internal fighting.
Talks were set to resume Tuesday and an Israeli army spokesman said Israel could withdraw from Qalqiliya and Jericho in the coming days. The initial pullout — planned for Tuesday — was postponed when the sides failed to agree to the details.
In an effort to support a delicate cease-fire declared by militants seven weeks ago, Abbas was scheduled to meet with leaders of the Islamic Jihad and Hamas in the Gaza Strip.
Prime Minister Ariel Sharon met early Tuesday with his defense minister and chief of staff to prepare a list of demands Israel plans to present to the Palestinians as conditions for a pullout from Qalqiliya and Jericho, security sources said.
Israeli Foreign Minister Silvan Shalom said Israel needs a guarantee that the pullback won't free Palestinians to resume attacks.
"If there isn't full assurance that terror won't originate from those cities, the plan won't move forward," Shalom said. "The Palestinians have to assert their authority."
Dahlan and Israeli Defense Minister Shaul Mofaz have agreed in principle on an Israeli handover of the towns of Jericho, Qalqiliya, Tulkarem and Ramallah, within two weeks,
Ramallah holds particular importance for the Palestinians because Yasser Arafat has been holed up in his headquarters there for nearly two years, besieged in a compound that has been mostly destroyed by the Israel army in an attempt to isolate the Palestinian leader.