JERUSALEM (AP) _ When a dozen Jewish families moved into six houses in Jerusalem's Arab district of Silwan this month, it wasn't just a real estate transaction.

It was the latest move in the block-by-block battle between Palestinians and Israelis over Jerusalem, which both sides claim as their religious and political center.

The battle heated up after the right-wing government of Prime Minister Yitzhak Shamir came to power two years ago and began backing and financing nationalists who want to set up Jewish bridgeheads in traditionally Arab east Jerusalem.

''The message is that the city is one,'' settler attorney Dan Avi-Isaac said Thursday when asked why it was important for Jews to live in Silwan, a hotbed of the Palestinian uprising where they have to live under police guard.

But Palestinian lawyer Jonathan Kuttab got a different message. ''This feeds the feeling among Palestinians that they will be forced out,'' he said. ''Part of the essence of Zionism is that this place must be made Jewish, to bring all Jews in and force all non-Jews out.''

Kuttab says Palestinians' fears of being driven out are heightened by a Supreme Court ruling in the 1970s that blocks them from owning property in the Old City's Jewish quarter.

Practically speaking, he said, Israeli laws also give Arabs almost no hope of regaining properties that they owned in West Jerusalem, the Jewish half of the city, before Israel was formed in 1948.

Israel claims sovereignty over all of the city, having annexed the Arab eastern sector after capturing it from Jordan in 1967. Most countries, including the United States, don't recognize the annexation.

Today, Jerusalem has 140,000 Arab and 340,000 Jewish residents. Jews live in west Jerusalem and in seven suburbs that were built on annexed land in a ring around east Jerusalem.

Despite official Israeli declarations, Jerusalem remains psychologically a divided city, with an invisible barrier of fear and suspicion separating the Jewish west and the Arab east.

This barrier, only strengthened by the four-year Palestinian uprising, irritates Jewish nationalists who say that they must settle throughout the city to shore up their historical claims.

Silwan, the settlers say, is the site where biblical King David built his Jerusalem. During the British Mandate period, some 300 Jewish families lived in Silwan and were expelled by the Jordanians during the 1948 war, Avi-Isaac said.

''The intention is to build a very nice new neighborhood,'' he said, adding it would serve as a bridge between the Jewish quarter of the walled Old City and the Jewish neighborhood of East Talpiot, built partly on annexed land.

In east Jerusalem, the settlers are aided by property laws that allow the government to seize homes and land left behind by Arabs who fled to Arab countries in 1948.

The Arab ''absentee property'' is administered by a government caretaker who usually hands it over to Jewish tenants with a long-term lease.

Only in very few cases has an Arab been able to retrieve his property in such neighborhoods as Baka and Talbieh in west Jerusalem where Arabs lived along with Jews before 1948.

In Silwan, about one-third of the 20 apartments in six houses claimed by the settlers are ''absentee property,'' Avi-Isaac said. Some two-thirds are apartments originally owned by Jews that were under Jordanian custodianship until 1967, he said.

But Israeli critics of the Silwan settlement said the way in which the settlers acquired the properties is murky at best.

Liberal legislator Chaim Oron noted that when Attorney General Yosef Harish issued his preliminary findings on the Silwan properties last month, he said many of the transactions appeared questionable.

On Wednesday, three days after the government endorsed the move by the Silwan settlers, Harish ruled that the six buildings were acquired properly, but the Justice Ministry would not release the text of his findings Thursday.

Oron said despite the legal squabbles, the real fight was political.

''It is a political demonstration against the Arabs, against co-existence and against the peace process,'' Oron said.