The ruling comes following a petition filed by Sheikh Jarrah's residents demanding to be allowed to hold a demonstration on Saturday night against the evacuation of some of them from their homes, which was banned by the police.
Supreme Court President Dorit Beinish wrote, "The burden the police has to carry in a city like Jerusalem with a diversified population is heavy indeed, but it is the police's duty to protect the protest goers."
Beinish nevertheless noted that should unexpected incidents occur during the rally police forces will be allowed to veer from the decision.
Earlier on Thursday, High Court judges criticized the police which asserted it would be difficult to facilitate the protest while maintaining public order.
Justices wondered why no effort had been made by the police to find an appropriate time for the demonstration.