The incident happened late yesterday, with a supervisor finding his body at a bus depot in Har Hotzvim, an industrial zone in Jewish west Jerusalem, police said in a statement.
Family members identified the victim as Yusuf Hasan al-Ramuni from Al-Tur on the Mount of Olives in annexed east Jerusalem. They ruled out suicide by the 32-year-old father of two.
But results from an autopsy carried out on the body today with the family's consent found no evidence of foul play in his death, police said.
Earlier, clashes erupted in the east Jerusalem neighbourhood of Abu Dis, where his family lives, as scores of protesters burned tyres and threw stones at police, who responded with tear gas and sponge rounds, AFP correspondent said.
Demonstrators could also be seen trying to break down part of Israel's towering concrete separation barrier which cuts through the neighbourhood, police and the correspondent said.
The funeral in Abu Dis later today was attended by thousands of people, some of whom chanted "revenge".
"According to an initial investigation, it appears there is no suspicion of criminal activity, in other words a suicide," Samri said in her statement, reporting "no signs of violence on the body".
But fellow bus driver Muatasem Fakeh said he had seen evidence to the contrary.
"We saw signs of violence on his body," he told AFP.
"He was hanged over the steps at the back of the bus in a place where it would be impossible to hang yourself alone," he added.
"My brother had children and was a happy man. It is impossible that he killed himself," he told AFP.
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