JERUSALEM — For years, Palestinians in the crowded East Jerusalem neighborhood of Silwan have complained that the walls of their homes were settling and cracking, disturbed by an underground archaeological dig led by a right-wing Jewish settler group.

On Sunday, when that dig was officially unveiled, not with a ribbon-cutting but with the ceremonial smashing of a brick wall, it was President Trump’s ambassador to Israel, David M. Friedman, who swung the first sledgehammer.

The reverberations were literal and metaphorical.

American ambassadors to Israel, to avoid being seen as taking Israel’s side in the conflict with the Palestinians, have long avoided public appearances in East Jerusalem. Israel captured East Jerusalem from Jordan in 1967 and then annexed it. Most of the world considers it illegally occupied, and the Palestinians want it as the capital of a future state.

But Mr. Friedman has pulverized diplomatic barriers before. In October, he attended a business conference in the West Bank settlement of Ariel, reportedly the first official visit to a Jewish settlement by an American ambassador.

But his starring role at the event run by the City of David Foundation on Sunday was more provocative. This time he was keynoting an event for a group that critics consider at the vanguard of efforts to bolster Israel’s claims to sovereignty in the areas of East Jerusalem immediately around the Old City.

Over the years, the group has moved hundreds of Jews into Silwan, a neighborhood with about 5,000 Palestinians. At the same time, it has led a sprawling excavation of an area of Silwan called Wadi Hilweh, where archaeologists say they have unearthed the original boundaries of biblical Jerusalem.

Sunday’s event represented the opening of what the group is calling the Pilgrimage Road, an underground passageway that leads several hundred yards from the Pool of Siloam, where the group says ancient Jewish pilgrims would cleanse themselves, to the point at which they would ascend the Temple Mount.

That discovery, among others trumpeted by the City of David, is of enormous importance to Israelis in an age when some Palestinian leaders have sought to deny Jewish historical claims to Jerusalem, even disputing the existence of the ancient Jewish temples.

“Here we have this powerful, irrefutable, undeniable evidence,” Mr. Friedman told the guests on Sunday, who included Israeli and American diplomats and lawmakers, the billionaire Republican donors Sheldon and Miriam Adelson, and Sara Netanyahu, wife of Prime Minister Benjamin Netanyahu.

Mr. Friedman added, “Were there any doubt, and to me there never was, about the accuracy, the wisdom, the propriety of President Trump recognizing Jerusalem as the capital of Israel, I certainly think this lays all doubts to rest.”

Critics say the City of David uses unorthodox archaeological techniques to highlight Jewish historical claims to the city while marginalizing those of Muslims and Christians. They also fault it for digging without the permission of the Palestinians living overhead. A handful of families have had to leave their homes because of damage caused by the excavations, advocates say.

In advance of Sunday’s event, Mr. Friedman also gave an interview to The Jerusalem Post in which he said he could not envision Israel’s ever giving up Silwan or the ancient City of David archaeological site below it in a peace deal.

“I do not believe that Israel would ever consider such a thought,” he told the paper. “The City of David is an essential component of the national heritage of the State of Israel. It would be akin to America returning the Statue of Liberty.”

Mr. Friedman’s remarks were only the latest cause for Palestinian outrage in a week that began with a White House-led economic conference in Bahrain that Palestinians boycotted, seeing it as an attempt to buy off their aspirations to statehood.

On Wednesday, Jason Greenblatt, Mr. Trump’s special Middle East envoy, who has pummeled Palestinian officials on Twitter, told an interviewer that he had never had reason to criticize Mr. Netanyahu or his government for their treatment of the Palestinians.

And on Thursday, Mr. Greenblatt suggested that peace would be more attainable “if people stop pretending settlements, or what I like to call neighborhoods and cities, are the reason for the lack of peace.”

But it was Mr. Friedman’s remarks on Sunday — and the image of his wielding a sledgehammer beneath Silwan — that Palestinians said had reached a new low.

“Every time I think they’ve done their worst, they come up with something more,” said Hanan Ashrawi, the veteran Palestine Liberation Organization official. “They will go to any length to show collusion, identification with and support for all these illegal acts, for the transformation of the character of Jerusalem, and for the willful targeting of Palestinians.”

“To have policymaking people buy into this and reinforce it, using religious claims to shape 21st-century political realities? This is dangerous,” she added. “It tells the world that the U.S. is complicit, and that there’s no limit to what it’s going to do.”

Mr. Friedman, however, insisted that he and his White House colleagues were merely describing things as they are, however difficult the Palestinians may find that to hear. “The truth is the only foundation on which peace will come to this area,” he said.

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