* Palestinian protesters clash with Israeli troops

* Senior Palestinian politician warns of new Intifada

(Adds Qurie quotes)

By Saed Hawari

ATARA, West Bank, March 15 (Reuters) - Israeli troops wounded at least seven Palestinians during a confrontation in the West Bank on Monday, Palestinian medical sources said, and a senior Palestinian politician said a new Intifada could break out.

Palestinian witnesses and medics said soldiers had fired live rounds at the demonstrators but the Israeli military denied this, saying other measures to disperse the crowd were used.

Tensions between Palestinians and Israel, which has occupied the West Bank since 1967, have escalated in recent weeks following an Israeli government decision to include West Bank religious sites in a Jewish national heritage plan.

Senior Palestinian politician Ahmed Qurie, a former prime minister, said steps taken by Israel, including measures Palestinians believe aim to deepen its control over Jerusalem, risked triggering a new Intifada, or uprising.

"If matters remain at this level, regardless of whether we take the decision or not, it is coming. If Israel continues these practices, it is coming," Qurie told reporters.

The leaders of President Mahmoud Abbas's Ramallah-based Palestinian Authority, which is backed by Western governments, have ruled out any repeat of the uprising mounted by the Palestinians in the early years of the past decade.

They have, however, stated support for "popular resistance", including protests, to put pressure on Israel to end its occupation of territories where the Palestinians aim to establish a state with East Jerusalem as its capital.

The Israeli army said on Monday it would limit access to two Palestinian villages which have been the scene of weekly protests against Israel's West Bank barrier.

Activists said the move was another sign of an Israeli decision to crack down on protests in the West Bank.

JERUSALEM TENSIONS

The Palestinians wounded on Monday were taking part in a demonstration against Israeli plans announced last week to expand settlements in East Jerusalem and the opening of a restored synagogue in the Jewish Quarter of the Old City.

They had marched to the checkpoint of Atara, north of Ramallah, from the nearby Birzeit University. Dozens of them hurled rocks at the soldiers. The Palestinian medics said two were hit by live ammunition.

But the Israeli military spokesman, who said one soldier was lightly injured, denied any such use of bullets:

"The security forces are responding using riot-dispersal means. There is definitely no live fire," he said.

Among anti-riot methods used by Israel are metal bullets covered in a rubber jacket.

Citing security concerns, Israel has banned Palestinians who do not have Jerusalem residency from crossing into the city from the West Bank until Tuesday. Dozens have been wounded in Jerusalem in recent weeks in clashes between Palestinians and Israeli security forces.

The opening of the restored Hurva synagogue, scheduled for Monday, has triggered criticism from Palestinian politicians who have repeated warnings against Israeli efforts to "Judaise" the city.

The synagogue was destroyed by Jordanian forces during the 1948 war from which the state of Israel emerged. Jordan occupied East Jerusalem and the West Bank until 1967.

The synagogue is several hundred metres (yards) from Jerusalem's holiest Islamic sites: the al-Aqsa mosque and the Dome of the Rock. (Additional reporting by Ali Sawafta and Mohammed Assadi in Ramallah and Dan Williams in Jerusalem; Writing by Tom Perry)