AFP journalists saw thousands of worshippers streaming into the Haram al-Sharif compound, known to Jews as the Temple Mount, for afternoon prayers. The site includes the Al-Aqsa mosque and the Dome of the Rock.
Some cried as they entered while others shouted "Allahu Akbar" (God is Greatest).
A last-minute confrontation threatened to derail the planned end of the boycott as Israeli police were keeping one of the gates leading to the holy site closed.
The gate is where two Israeli policemen were killed on July 14, prompting the new security measures.
Police later opened the gate and Palestinians stuck to their plan to end the boycott.
A tense standoff had been underway between Israel and Muslim worshippers at the holy site despite the removal of metal detectors on Tuesday.
Newly installed railings and scaffolding where cameras were previously mounted were also cleared early Thursday, after which police said all new security measures had now been removed.
Muslims had refused to enter the compound and prayed in the streets outside after Israel installed the new security measures.
Palestinians viewed the move as Israel asserting further control.
In response to the removal of the security measures, Muslim authorities called on worshippers to return.
Israeli authorities said the metal detectors were needed because the July 14 attackers smuggled guns into the compound and emerged from it to attack the officers.
Deadly unrest erupted in the days after the new measures were introduced, with clashes breaking out around the compound and in the occupied West Bank, leaving five Palestinians dead.
A Palestinian also broke into a home in a Jewish settlement in the West Bank last week and stabbed four Israelis, killing three of them.
Palestinian Muslims raise their hands in prayer inside the Haram al-Sharif compound in the old city of Jerusalem, with the Dome of the Rock seen in the background
Palestinians ended a boycott and entered a sensitive Jerusalem holy site for the first time in two weeks Thursday after Israel removed controversial security measures there, potentially ending a crisis that sparked deadly unrest.
