"Currently, the annual Jerusalem Day's flag-waving parade will be held as planned," the police said in a statement sent to Xinhua news agency on Sunday.
In Monday's parade, thousands of Israelis are expected to march through East Jerusalem's Old City, which Israel captured in the 1967 Middle East war and annexed shortly afterwards.
There were calls to cancel or to change the route of the parade in the wake of escalating clashes between Israeli security forces and Palestinians in the Old City during the past weeks.
Former police chief Arieh Amit told Army Radio that the flag parade should be rerouted away from the Old City's Damascus Gate.
"Allowing the parade to pass through the Damascus Gate will be a folly," he said.
Earlier on Sunday, fresh clashes erupted at East Jerusalem's Al-Aqsa Mosque compound after the end of the morning prayer.
At least 10 Palestinians were injured.
About 290 Palestinians were injured over the weekend in clashes at the Al-Aqsa Mosque compound and other parts of East Jerusalem.
The clashes triggered international condemnations and calls from Arab states, the US, Europe and the UN for Israel to stop the violence.
During Sunday's cabinet meeting, Prime Minister Benjamin Netanyahu said Israel will "continue to keep freedom of worship" but "will not allow violent disturbances".
The clashes were sparked by the threatened eviction of dozens of Palestinians from their homes in Sheikh Jarrah neighbourhood in East Jerusalem and the restrictions imposed by Israel during the holy Muslim month of Ramadan.
Israel seized the West Bank, East Jerusalem, and Gaza Strip in the 1967 Middle East war.
It annexed East Jerusalem shortly after the war, claiming it part of the Israeli capital.
The Palestinians wish to build their future state on these lands, with its capital in East Jerusalem.