The Israeli state has swung into action against a group of Palestinian activists who set up a tent village on a rocky hillside east of Jerusalem, with the prime minister, Binyamin Netanyahu, ordering the military to evict the protesters and impose a closed military zone in the area.

Netanyahu demanded the Israeli supreme court overturn an injunction preventing the removal of the protesters, and ordered the closure of access roads in the area pending a full-scale evacuation.

Around 200 Palestinian activists set up the village, named Bab al-Shams ('gate of the sun') and comprising around 20 tents, early on Friday morning on a highly sensitive swath of land known as E1 which Israel has earmarked for settlement development. The protesters' actions echoed the tactics of radical settlers when establishing wildcat outposts in the West Bank.

In a statement, the protesters said: "We, the sons and daughters of Palestine, declare the founding of the village Bab al-Shams, by order of the people, without permission from the occupation, or any other body, because this land is ours, as is the right to build on it."

The tents were erected on privately-owned Palestinian land, the protesters said, with the full permission of the landowners. The activists sought legal protection from the supreme court, which granted an injunction against eviction and gave the state of Israel up to six days to respond.

The protest was launched six weeks after Netanyahu announced plans to press ahead with the development of E1, triggering strong international condemnation. The area, which is around 12 sq km, lies between Jerusalem and the vast West Bank settlement of Ma'ale Adumim.

The Palestinian Authority and most western diplomats say the development of E1 will damage the prospects of a viable Palestinian state by almost bisecting the West Bank and effectively cutting off the West Bank from east Jerusalem, which is intended to be the future capital of a Palestinian state.

Scores of supporters visited the site, perched close to a Bedouin encampment and within sight of a huge Israeli police headquarters, on Saturday. Activists brewed sweet tea and coffee on open fires, and volunteers manned a medical centre in one tent. Rubbish was collected by a team organised by a member of the seven-strong "village council".

Mahmoud Zawahra, one of the protest leaders, described the tent village as "constructive resistance". "We are part of a non-violent resistance movement. For us, this is occupied land so we created a village to stop the Israeli plan to build a settlement here," he said.

The protesters expected the army to take action, he added. "We will resist evacuation in a non-violent way."

Another activist, Samir, who declined to give his full name, said the protest had been organised secretly. "We know the army follow us on Twitter and Facebook, so we made out we were holding a protest somewhere else."

Activists were trained in non-violent resistance techniques, he added. "This is not a scout camp, it is to empower Palestinians on the ground. We know [the army] will come, and we are prepared."

Tha'ar Aniz, from nearby Azariya, said temperatures had plummeted overnight. "It was very cold. But if you want to be free, you have to withstand such things."

Israeli security forces prevented Palestinian officials Hanan Ashrawi and Saeb Erekat from visiting the site on Saturday. Earlier Ashrawi welcomed the establishment of Bab al-Shams, saying: "This initiative is a highly creative and legitimate non-violent tool to protect our land from Israeli colonial plans. We have the right to live anywhere in our state, and we call upon the international community to support such initiatives, as well as to protect those who are being threatened by Israeli occupation forces for exercising their right to peaceful resistance against the illegal Israeli occupation."