Israel has ordered the cancellation of a children's puppet festival at a Palestinian theatre in East Jerusalem, claiming the eight-day event has been unlawfully sponsored by the Palestinian Authority. East Jerusalem is outside the PA's jurisdiction.

The el-Hakawati theatre, known as the Palestinian national theatre, has been running an annual festival for children for the past 18 years. This year's event was due to begin last Saturday, with performances from Israeli-Arab theatre groups and visitors from France, Norway and Turkey.

But last week staff found a notice plastered to the premises, ordering the cancellation of the festival at the theatre or any other venue in Israel.

Signed by Israel's public security minister, Yitzhak Aharonovich, it read: "It has come to my attention that between the dates of 22 June and 30 June the theatre is scheduled to hold events within 'Palestinian Children's Week' at el-Hakawati Theatre in Jerusalem, and these events will be held with the Palestinian Authority's sponsorship or on its behalf, without having received written authorisation for this as required. Therefore, by the power invested in me by law, I hereby instruct not to hold the events here or in any other location within the state of Israel."

A spokeswoman for the public security ministry told the Guardian that legal permission was required under the 1994 Oslo Accords for the PA to hold any event within Israel. "We don't have any objection to artistic or cultural activities for children, but it has to be within the law," she said.

Abdel Salam, the puppet festival's director, said the order was "simply unbelievable". He told the Israeli newspaper Ma'ariv: "There is no political content in the plays and the shows that were supposed to be staged at the festival. We are accused of political activity even though these are just children's plays."

The deputy mayor of Jerusalem, Yosef Alalu, wrote to the minister to say his action was "wrong and irresponsible".

"It only increases the hatred and anger of the East Jerusalem public against us," his letter said, according to Ma'ariv.

East Jerusalem was occupied by Israel in the 1967 six-day war, and later annexed, in a move not recognised by the international community. The Palestinians intend East Jerusalem to be the capital of a future state.