The bill, which will be presented when the Knesset returns from its summer recess, was a response to a protest two weeks ago at Tel Aviv’s Rabin Square during which Palestinian flags were waved.
IDF forces were preparing for the protests on Friday, reports said.
"Waving the Palestinian flag over a Jewish summer camp is like waving a KKK hood in a black church."
The camp raised the flag as a gesture of "friendship and acceptance" for a visiting delegation.
Thousands of Palestinians flocked to the compound on Thursday after controversial metal detectors and security cameras at the site were removed.
Settlers have called on the IDF to protect the Samaria Regional park after a Palestinian flag was placed on the site.
Security measures had been stepped up ahead of the Europa League soccer match between St. Etienne and Beitar Jerusalem in France on Thursday.
The deadly clash comes more than a month after another firefight between PA security services and gunmen in Nablus’s old city, which left two other officers dead.
The plea from the Palestinians follows Israeli ambassador's statements on Tuesday calling the bid a “cynical misuse” of the UN to score hollow political points.
A vote will take place 10 days before the annual summit of 193 nations convenes at UN headquarters in New York.