Campaigners say the planned Museum of Tolerance would disturb centuries-old graves and desecrate the cemetery.
Rania Madi of the Palestinian group BADIL says activists have exhausted their efforts in Israeli courts.
In 2004, Palestinian and Israeli advocacy groups filed a petition against the planned construction. The Supreme Court considered the legal arguments for nearly four years, finally giving the go-ahead in 2009 to the Los Angeles-based Simon Wiesenthal Center.