Israel shut the Al-Aqsa mosque compound then promised to reopen it, after clashes in east Jerusalem where police killed a Palestinian accused of trying to murder a hardline rabbi.
Thursday's pledge also came after Arab and US calls for the Jewish state to reopen the Holy City flashpoint.
Police spokeswoman Luba Samri told AFP the shrine would open early on Friday "for dawn prayers, after midnight" following its first closure in decades.
Israel said its clampdown on the shrine, which is holy to Jews and Muslims alike, was a temporary measure aimed at calming tempers.
Samri said that because of fear of unrest at Friday midday prayers, entry for Muslim men would be restricted to those over 50.
There would be no restrictions on Muslim women.
Non-Muslims are routinely not allowed access on Fridays.
Thursday's closure brought Arab and US calls for Muslim worshippers to be allowed access, and Palestinian president Mahmud Abbas condemned it as an Israeli "declaration of war".
Wednesday night's wounding of the rabbi and the subsequent killing of the suspected gunman sent tensions soaring to a new high, following months of almost daily clashes between Palestinians and Israeli police in Jerusalem's occupied eastern sector.
Officials from the Islamic Waqf, which administers the compound, said it was the first closure since Israel seized Arab east Jerusalem during the 1967 Six-Day War.
"This dangerous Israeli escalation is a declaration of war on the Palestinian people and its sacred places and on the Arab and Islamic nation," Abbas said through his spokesman Nabil Abu Rudeina, warning it would only fuel "more tension and instability".
But a spokesman for Israeli Prime Minister Benjamin Netanyahu said the closure aimed "to prevent riots and escalation as well as to restore calm and status quo to the Holy Places".
Residents of the Jerusalem neighbourhood of Abu Tor were left reeling after a dawn police raid killed Muataz Hijazi, 32.
Israel said he was behind the attempt to gun down far-right activist Yehuda Glick, who has lobbied for Jewish prayer rights at the Al-Aqsa compound.
Police said Hijazi shot at officers who returned fire, killing him.
However, Hijazi's brother Khalil said police had burst into the house at 6am, and then shot him on the roof.
Islamic Jihad said Hijazi was one of its militants.
In a development the Palestinians claimed was related to the unrest in Jerusalem, Sweden announced its formal recognition of a Palestinian state, becoming the first EU member in western Europe to do so.
Abbas hailed Stockholm's decision as "brave and historic".
Israel recalled its ambassador from Sweden for "consultations" and Foreign Minister Avigdor Lieberman denounced the move as "deplorable", issuing a sardonic statement noting that "relations in the Middle East are a lot more complex than the self-assembly furniture of IKEA".
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