During the 1947-48 War, the Israeli military conquered only the western half of the city, most of which was owned by Palestinian Arabs, and declared it the capital of Israel. East Jerusalem remained virtually entirely Palestinian, with the exception of a handful of religious Jews who remained in the Old City's ancient Jewish Quarter, during the years under Jordanian administration. Israeli Jews were prohibited from entering East Jerusalem, and Palestinians were kept out of West Jerusalem. In 1967, when the Israeli army conquered East Jerusalem along with the West Bank, Gaza Strip, the Syrian Golan Heights and Egypt's Sinai Peninsula, one of Israel's first acts was to declare Jerusalem an eternally "united" city. In fact it was never unified; the old border, or Green Line, was legally erased, but remained vivid in the minds of Jerusalemites on both sides. During the first intifada, from 1987-1993, taxi drivers from West Jerusalem would routinely refuse to take passengers into the eastern part of the city, claiming they or their passengers would be at risk.
But beginning immediately after the 1967 occupation, Israel began building huge settlement blocs within East Jerusalem, such as French Hill, which were quickly incorporated into Jewish Jerusalem and never acknowledged as settlements. There are now 200,000 Israeli Jews living in East Jerusalem settlements primly defined as "neighborhoods."
Simultaneously, Palestinian Jerusalemites found their rights severely constrained. Permits for building new houses or additions to over-crowded homes are virtually unobtainable for Palestinians. Marrying a partner from outside the city can put one's residency permit at risk. Arabs in East Jerusalem are considered legal residents--thus they have the right to vote for city council--but are denied full Israeli citizenship.