ATARA, West Bank, March 15 (Reuters) - Israeli troops injured at least seven Palestinians during a confrontation in the occupied West Bank on Monday, Palestinian medical sources said.

Palestinians said the soldiers had fired live rounds at the demonstrators but the Israeli military denied this, saying crowd-dispersal measures had been employed.

Tensions between Palestinians and Israel, which has occupied the West Bank since 1967, have escalated in recent weeks following an Israeli government decision to include West Bank religious sites in a Jewish national heritage plan.

The medical sources said two of the men were hit by bullets during the confrontation at Atara checkpoint, north of Ramallah. An Israeli military spokesman denied reports from witnesses and medics that soldiers had used live rounds.

The Palestinians had marched to the checkpoint from the nearby Birzeit University. Dozens of them hurled rocks at the soldiers.

The Israeli military spokesman said one soldier was lightly injured.

The security forces are responding using riot-dispersal means. There is definitely no live fire, he said.

The announcement last week of Israeli plans for new settler homes near East Jerusalem, which the Palestinians want as the capital of their state, have also served to fuel tension.

Citing security concerns, Israel has banned Palestinians who do not have Jerusalem residency from crossing into the city from the West Bank until Tuesday.