Cameron was responding to a question about the Palestinian plight from Labour MP Imran Hussain in the House of Commons.
"I am well known for being a strong friend of Israel, but I have to say the first time I visited Jerusalem and had a proper tour around that wonderful city and saw what had happened with the effective encirclement of East Jerusalem, occupied East Jerusalem, it is genuinely shocking," the British prime minister said.
He criticized the Israeli government's policies, saying "we do not support illegal settlements, we do not support what is happening in East Jerusalem and it's very important that this capital city is maintained in the way that it was in the past."
Jerusalem Mayor Nir Barkat rejected Cameron’s comments, saying Cameron was wrong in his assessment because he is unfamiliar with the reality and facts on the ground.
Barkat sardonically wondered what construction Cameron finds so shocking: “Is it the newest and most advanced schools that we are building there? Is it the new roads that we are paving there? The childcare or the recreational centers? Where exactly does the Palestinian Authority invest in this way?”
He went on to cite international polls which he claimed indicate that Arab residents of the city prefer a united Jerusalem and highlighted the contrast between the lives of Arabs in Jerusalem with those in surrounding Arab countries.
“The situation of the residents of the city is significantly better than those in the countries which surround us and, needless to say, than the situation during the British Mandate in Israel,” Barkat charged.
He argued that all citizens in Jerusalem as in London have the right to live where they choose, irrespective of religion, race, or gender.
Nevertheless, Barkat invited Cameron, who he said was a “true friend of Israel,” to join him for a personal tour of the city. “I invite him to come and see how we have minimized the social gaps in eastern Jerusalem and I invite him to promote connections, developments, and local cooperation together with us instead of building walls and conflicts in the heart of Jerusalem.”
Cameron's comments came almost at the same time as US Secretary of State John Kerry, who said Israeli settlement construction was not helping ease the tensions between the two warring sides.
"I think that I know we need to see measures taken on both sides to indicate a readiness and willingness to try to proceed forward and reduce the violence," Kerry said, when asked about heightened violence.
US President Barack Obama also addressed the situation in the region during a meeting with Jordanian King Abdullah II.
TPS contributed to this story.