While Jerusalem's Old Town may boast the cheapest accommodation, it is by no means the friendliest. Be forewarned.
Petra Hotel and Hostel: 1 David Street. Just inside Jaffa Gate with magnificent views across the Old City to the Dome of the Rock. Breakfast included. Roof: 40 NIS; Dorm: 70 NIS; Private Room: 180 NIS.
New Swedish Hostel: David St 29, Jaffa Gate, from 80 LE.
Jerusalem Hostel: 44 Jaffa Rd. Clean hostel with a convenient central location on Zion Square. Dorm: 80 NIS; Private Room: starting from 230 NIS.
Hebron Hotel (formerly known as Tabasco Hostel): 8 Aqabat Teqreh Street. Roof: 12 NIS; Dorm: 50/60 NIS; Private Room: 80 NIS.
Heritage House: for men: 2 Ohr Hachaim Street, for women: 7 HaMalach Street. The Heritage House Jewish Youth Hostel is inside the Jewish Quarter. Learning opportunities and Shabbat hospitality are available to guests and non-guests. Free.
Ramsis Hostel(guest house): 20 Hanevim Street ((outside) damascus gate). checkin: 12.00pm; checkout: 10.00am. Very friendly and the location is outstanding, right on the very frontline between east and west, with the bars in West Jerusalem only a 5 minute walk away. Wireless internet included in price. The manager's name is Mike and he can speak English, Hebrew and Romanian. dormbed=$10 private =$15 free tea or coffee.
Jerusalem Panorama Hotel: P. O. Box 19768, Jerusalem 97400. The Jerusalem Panorama Hotel is situated on the Hill of Gethsemane overlooking the Old City of Jerusalem and within walking distance from the Old City Walls.
Golden Gate Inn: Khan al-Zeit st., Old city. Has breakfast included and free WiFi. Very near Damascus gate and about a 8 minute walk to Jaffa gate. Rooms are clean although tiny but that's expected for the price. 150 NIS or so for a private single.