The Israeli move came after Palestinian president Mahmud Abbas instructed security forces and political factions to prevent any escalation of the violence which has raised fears of a new intifada or uprising.
The Al-Aqsa compound has been the focus of angry protests which have raged in annexed east Jerusalem and the occupied West Bank, and which on Tuesday spread to the heart of Israel with masked Arab Israeli demonstrators hurling stones at police in the Jaffa district of Tel Aviv.
There have been repeated clashes in and around the compound in Jerusalem's Old City through a succession of Jewish religious holidays that have seen a rise in the numbers of Jewish visitors.
The disturbances prompted Israel to deny entry to Muslim men under 50 from Sunday.
But police announced late on Tuesday that the restriction would be lifted in time for Wednesday's Muslim prayers.
US State Department spokesman Mark Toner welcomed the move as "a step in the right direction" to ease tensions.
The talks followed Abbas's call for restraint.
"We are telling our security forces, our political movements, that we do not want an escalation, but that we want to protect ourselves," the official Wafa news agency quoted the Palestinian leader as telling officials.
Abbas's intentions had been unclear before his latest comments, particularly after a speech he gave to the UN General Assembly last week in which he declared he was no longer bound by accords with Israel.
They included a temporary ban on Palestinians entering Jerusalem's Old City, except for residents, business owners and schoolchildren. That was lifted on Tuesday.
