Israeli police evicted about 50 people from a neighbourhood in East Jerusalem, the UN said Sunday, before Jewish settlers were allowed to move in and occupy the homes.

Police arrived in the Arab neighbourhood of Sheikh Jarrah before dawn, cordoned off an area and removed two families, according to UN spokesperson Chris Gunness.

Police said a ruling by the Israeli Supreme Court last year decided the homes belonged to Jewish families and that the Arab families had lived there illegally.

"This has been in the courts for quite some time and ultimately it was ruled that this property did in fact belong to other people and that's why they were evicted," Mark Regev, a spokesperson for Israeli Prime Minister Benjamin Netanyahu, told CTV News Channel on Sunday.

"I understand that people feel frustrated about moving from where they've been living but let's remember the court looked at this in a very objective way, a professional way and a decision was taken."

CNN reporter Paula Hancocks said the families claim they can produce documents that prove they have lived in the homes since the 1950s.

"Many of the residents are saying that this is their property, that they have proof that they have lived there since 1956, that many members of the family were born there," Hancocks told CTV News Channel on Sunday morning.

UN Special Co-ordinator for the Middle East Peace Process, Robert Serry, said the evictions were "totally unacceptable."

"These actions heighten tensions and undermine international efforts to create conditions for fruitful negotiations to achieve peace," Serry said in a statement.

East Jerusalem has been a particularly contentious issue between Israelis and Palestinians.

Israel annexed east Jerusalem in 1967 and has since built Jewish settlements that total about 180,000 people. Meanwhile, Palestinians want east Jerusalem to be the capital of a future Palestinian state.

About 270,000 Palestinians live in east Jerusalem. The city's total population is 760,000.

The United States and the UN have lobbied Israel to forgo evicting Palestinians and building new Jewish settlements in the region, decisions they say compromise the Middle East peace process.

U.S. State Department spokesperson Megan Mattson said evictions violate Israel's obligations under the so-called "road map" peace plan.

"Unilateral actions taken by either party cannot prejudge the outcome of negotiations and will not be recognized by the international community," Mattson said in a statement.

Hancocks said that a small number of international activists were camped out at the houses to try and prevent the evictions, "but they were arrested and driven away."

Hancocks said that a representative from the U.S. consulate also tried to gain access to the neighbourhood to observe the evictions, but was denied entry.

Mustafa Barghouti of the Palestinian National Initiative called on the international community to impose sanctions on Israel in an effort to halt settlement construction.

"The fact that Israel continues to build settlements in occupied territories means that Israel does not want to have a Palestinian state appear," Barghouti told News Channel. "This is a death sentence to the possibility of peace based on a two-state solution."

With files from The Associated Press