Perhaps at some time in the future, Israel, the Palestinian National Authority, and the Arab League will make a treaty to divide the land of Palestine/Israel into a state of Palestine and a state of Israel. Let's assume this also gives Palestine sovereignty on top of the Haram esh-Sharif hill. Is there any religious prohibition on such a treaty?
This depends on the terms of the treaty and other circumstances surrounding it. In general, a temporary peace treaty is permissible when it is deemed necessary or would serve some interest.
وإن جنحوا للسلم فاجنح لها وتوكل على الله إنه هو السميع العليم
And if they incline to peace, then incline to it [also] and rely upon Allah. Indeed, it is He who is the Hearing, the Knowing.
it won't be allowed... Israel is considered a belligerent state. Treaties and trades are not allowed except with certain conditions. It is like the two-state solution brokered by the US, it is recognising the state of israel while we, as muslims, don't recognise them. Israel is an intruder and is occupying an area that was part of the Islamic state, therefore, we must evict it.
And this question clearly assumes Islam acknowledges and agrees with nation states. It does not.