About 300 protesters arrived outside parliament to demand public security minister Gilad Erdan stand down, holding him responsible for the actions of police forces who shot the Palestinian man.
"Erdan resign, we won't tolerate you anymore," protesters chanted as riot police on horseback stood close bye and a police helicopter hovered overhead.
Yacoub Abu al-Qiyan, 50, was killed last Wednesday when police staged a pre-dawn raid on the Bedouin village of Umm al-Hiran to demolish several homes.
Police said he was shot as he deliberately drove at officers, killing a policeman.
However, residents strongly denied the allegation, calling him a respected teacher and saying that he was shot before losing control of the car.
"He is a victim, he is a martyr, he was an educator. He was not IS, not a terrorist," Palestinian member of the Israeli Knesset, Ahmed Tibi told protesters on Monday, holding a black flag of mourning.
"We demand to know who gave the order, who brought live ammunition to Umm al-Hiran," he added.
As Monday's protest dispersed peacefully, the nearby supreme court was hearing a petition from the dead man's family for police to release his body for burial.
Government lawyers, quoted in a court statement, said police were prepared to hand over the body subject to several conditions to prevent a potentially violent protest at the funeral.
Among the conditions included were provisions that police should determine the time of the burial and the number of mourners present, and that political speeches must not be conducted, nor loudspeakers used.
But Tibi strongly rejected the terms which he described as unacceptable.
"We want to bury him without any condition, it is a very simple right," the deputy said.
The court eventually rejected the state's demands, ruling that Qiyan's body would be handed to the family which could hold a two-hour daytime funeral on Tuesday with no limitations on the number of participants, a statement read.
Israel routinely places preconditions on returning the bodies of Palestinians it accuses of carrying out attacks, arguing the funerals can turn into glorifying violence.