Jerusalem is an epicenter of a series of contested confrontations and events both from the past and throughout modern history; today it is a living paradigm of distinctive apartheid that is epitomized, among many of its other forms, in the urban planning system practiced in the City, where indigenous Palestinian Jerusalemites have substandard living rights. This paper will attempt to demonstrate and expose Israeli Occupation planning and building policies and uncover the systematic discrimination adopted and practiced against Arab-Palestinians. This discrimination is mainly manifested in the prejudiced zoning classifications of occupied East Jerusalem in favor of illegal Israeli-Jewish existence there to that of the Palestinian population, which include, among others: discrimination in building permits and regulations, confiscating and razing land, erecting and expanding illegal Israeli colonies and outposts, paving Israeli designated roads, demolishing Palestinian houses, and now excluding entire Arab-Palestinian communities with the Separation Wall. Furthermore, the paper will work on the delineation of de facto Israeli administrative changes of the demarcated Jerusalem City boundary set within the United Nations partition plan of November 29, 1947, where the City of Jerusalem comes under “Corpus Seperatum” status and is to be administered by a Special International Regime. The paper will also show the ramifications of the unilaterally and illegally imposed “new municipal boundaries” post the 1967 Israeli occupation of East Jerusalem, which is currently 10 time its original size, ending with the 2005 “Jerusalem 2020 Master-plan.” Jerusalem, according to the Israeli adopted Masterplan-2020, has “NO AREA” for future Arab Jerusalemite development, with more than half of its total area already considered built-up area. According to the master-plan about one-quarter of East Jerusalem is “temporarily” zoned as green areas, thus keeping the possibility for future Palestinian urban expansion to only 6%. The paper studies, analyzes, and projects the de facto Israeli planning paradigm, which results in new building styles and a manipulating land-use policy practiced on the basis of unjustified security concerns and demographic considerations in order to manipulate the demographic balance in Jerusalem in favor of the Jewish population. The Israeli presence in East Jerusalem tipped from 0% pre-1967 to 47% in 2007, whereas the Palestinian presence in West Jerusalem plummeted from 23% to 0%. Ostensibly, the carefully enacted demographic policy adopted by the Israeli Jerusalem Municipality was the cornerstone of the planning theme for Jerusalem. Under this planning theme Palestinian existence is confined to a maximum of one-quarter of the city’s population with an end goal of the de-Palestinization of Jerusalem, jeopardizing the inevitable destiny of Palestinian statehood with Jerusalem as its sovereign capital.