El-Hakawati Theater displayed signs on its windows, saying it was closed from June 22 to 30, after receiving an order issued by Internal Security Minister Yitzhak Aharonovitch on the grounds that its alleged sponsorship by the Palestinian Authority was illegal.
"Aharonovitch decided on Friday to close the Hakawati Theater for a week because its activities were being organized under the auspices of the Palestinian Authority," police spokesman Luba Samri told AFP.
Theater director Mohammed Halayiqa condemned the decision as "disgraceful", saying the PA had no involvement in the International Puppet Festival which was funded by donations from abroad and aimed at children.
"Israeli security services summoned me on Thursday and Friday to ask about the source of the funding," he told AFP.
"Their sources, they said, had told them it was being funded by the PA, and I was handed an order to close the theater for that week, preventing the festival from going ahead."
Halayiqa said staff had gone to great efforts to decorate the theater especially for children, and had stressed to Israeli security services that the festival had no political ties whatsoever.
It was the first time El-Hakawati Theater had been closed for this length of time since it opened nearly 20 years ago, Halayiqa said, adding that he would appeal against the decision.
A spokeswoman for the Ministry of Public Security told AFP, "The theater was closed since it operated under the auspices of the Palestinian Authority, without a permit as required by law. An announcement to this effect was given to the theater director.
"The Public Security Ministry is not opposed to artistic and cultural activities for east Jerusalem children, as long as they are conducted according to law," she said.