JERUSALEM (Reuters) -- Right-wing Israeli marchers scuffled with Palestinians as a procession marking the Israel's annexation of East Jerusalem entered the old city's Muslim quarter on Sunday, police said.

Tens of thousands of Israelis turned out to celebrate the anniversary of the capture of the territory in a 1967 war.

Fifteen people were arrested after fighting between some marchers and Palestinians who gathered outside the Old City walls, said police.

"Ten Jews were arrested for calling out racist slurs and attacking Arabs. Five Arabs (were arrested) for throwing objects and attacking (Israelis)," Jerusalem's police force said in a statement.

Earlier, two Israeli Knesset members toured the Al-Aqsa compound accompanied by over 20 right-wing activists as part of Jerusalem Day celebrations, Israeli daily Haaretz reported.

Palestinians regard East Jerusalem as the capital of an independent state they hope to establish in the West Bank and the Gaza Strip. In 1980, Israel's parliament passed a law declaring united Jerusalem as the national capital, a move never recognised internationally.

"Israel without Jerusalem is like a body without a heart," Prime Minister Benjamin Netanyahu said at a commemoration ceremony on Sunday. "It will never be divided again."

PLO official Saeb Erekat condemned the celebrations, saying they were "clear proof that peace is not part of the Israeli government's agenda."

Peace talks between Israelis and Palestinians collapsed in 2010 a few weeks after they began.