Mr Abu Arafeh, a member of Hamas - the militant Islamist movement, was detained at a checkpoint at the entrance to al-Azaria, a suburb of east Jerusalem which is part of the occupied West Bank.
“They asked us for ID, they said 'get out.' He (Abu Arafa) said
'I am not getting out.' They opened the car and pushed him out," Ahmed Jalajel - who was in the car with Mr Abu Arafa when he was detained - told AP.
"They asked him to sit down on the ground, and then they checked the IDs. They asked him to get into their jeep. He refused, then they pushed him into the jeep," the photographer said, adding that he tried to take a picture but the security forces broke his camera.
Israel’s domestic Shin Beth security agency is reportedly handling the case, though Israeli defence officials have confirmed Mr Abu Arafa had been taken into custody.
Jerusalem police have referred all questions to the prime minister's office, which was not immediately available for comment.
Mr Abu Arafa, a Jerusalem resident born in 1961, has been detained several times by Israel in the past.
Ziad Abu Zayyad, the former minister of Jerusalem affairs, said members of Mr Abu Arafa's entourage informed him of the detention.
He said the two were due to meet so Abu Zayyad could hand-over office supplies that belong to the Palestinian Authority.
The Jerusalem affairs office has been in the West Bank for several years because interim Israeli-Palestinian peace accords bar the Palestinian Authority from opening offices in the disputed city, Mr Abu Zayyad said.
Israel bans all political activity in east Jerusalem, which the Jewish state occupied in the 1967 Middle East War and subsequently annexed.
Not the first
The arrest of Mr Abu Arafeh came just one month after Israeli police briefly detained two newly elected Hamas MPs in east Jerusalem on March the 1st.
As part of a series of sanctions imposed following Hamas's victory Israel has barred the movement's MPs from traveling between the West Bank and Gaza Strip.