* Palestinian youth was abducted, witnesses say
* Suspicions he was killed to avenge slain Israeli teens
* Israeli police investigating (Adds protests, reactions)
By Ammar Awad
JERUSALEM, July 2 (Reuters) - Palestinians clashed with Israeli forces in Jerusalem on Wednesday after the discovery of a body raised suspicions a Palestinian youth had been killed by Israelis avenging the deaths of three abducted Jewish teens.
Palestinian residents in Shuafat, an Arab suburb of Jerusalem, told Reuters they had seen a teenager forced into a vehicle outside a supermarket on Tuesday night.
Residents say the boy was Mohammed Abu Khudair, 16.
Micky Rosenfeld, a spokesman for Israeli police, said police had been notified of a youth "pulled into a vehicle and possibly kidnapped" and roadblocks were set up in search of suspects.
Later "police discovered a body in the Jerusalem forest and were looking to see if there was a connection between the missing youth and the body that was found", Rosenfeld said.
A senior official of the Palestinian President Mahmoud Abbas's Fatah movement told Reuters the missing teenager's family had identified the corpse as their son. The family was not immediately available for comment.
"The Israeli government bears responsibility for Jewish terrorism and for the kidnapping and murder in occupied Jerusalem," the official, Dmitry Diliani, said.
An Israeli security source, speaking on condition of anonymity, said Israel suspected the youth had been kidnapped and murdered, possibly in retribution for the killings of the Israeli teens, whose bodies were found on Monday, nearly three weeks after they were abducted in the occupied West Bank.
As word spread of the Palestinian teenager's disappearance and the discovery of a body, hundreds of Arab youths blocked Jerusalem's light railway and threw rocks at Israeli security forces, who responded with rubber-coated bullets.
There were no reports of serious injuries.
On Tuesday, the three slain Jewish seminary students were buried in a funeral attended by tens of thousands of mourners. Israel says Hamas militants killed them. The Palestinian Islamist group has neither confirmed nor denied the allegation.
While the teenagers were being buried in the city of Modi'in, dozens of Israelis, some chanting "Death to Arabs", blocked a road in Jerusalem.
Tensions were also high in the West Bank, where around 40 Palestinians were arrested in raids throughout the West Bank on Tuesday, the latest in a campaign by Israel to cripple Hamas there. Four people were wounded by live bullets early on Wednesday in an Israeli raid in the Palestinian city of Jenin.
Palestinian President Mahmoud Abbas called on Israeli Prime Minister Benjamin Netanyahu to condemn the youth's killing, the Palestinian state news agency WAFA said. Abbas had condemned the kidnapping of the three Israeli youngsters.
"The murder of the Arab youth is despicable and shocking. I call on the police not to spare any effort and to apprehend the murderers as quickly as possible and to bring them to justice," Uri Ariel, Israel's right wing housing minister, said in a statement on Wednesday.
Reviving a punitive policy suspended in 2005 as a Palestinian uprising waned, Israeli forces destroyed the home of a Palestinian arrested this month on charges of shooting dead an off-duty police officer in the West Bank in April.
Israel says demolishing the homes of Palestinians involved in attacks on Israelis has a deterrent effect. Rights groups have condemned the practice as collective punishment.
(Additional reporting by Ori Lewis in Jerusalem and Noah Browning and Ali Sawafta in Ramallah; Writing by Noah Browning; Editing by Jeffrey Heller and Alison Williams)