Baird met last Tuesday with Justice Minister Tzipi Livni, who is also Israel's chief negotiator with the Palestinians, in the disputed territory, which the Palestinians and the United Nations consider occupied land.
The Palestinian Foreign Ministry said it summoned Katherine Verrier-Frechette on Sunday "to express its strong dissatisfaction" over the meeting.
The Palestinian official in charge of American affairs, Hosni Abdul Wahid, called Baird's meeting "a deplorable step."
Baird has defended his action, saying where he has coffee with someone is "irrelevant" to the larger discussion of Middle East peace and does not signal a shift in Canadian foreign policy.
His spokesman, Rick Roth, said in an email to The Canadian Press on Sunday that "As guests, we were pleased to meet our hosts where it was most convenient for them."
However, previous Canadian government ministers have avoided crossing into East Jerusalem with Israeli officials as a matter of principle and practice.
The diplomatic protest came just days after chief Palestinian negotiator Saeb Erekat sent a strongly-worded letter to Baird.
"Your recent meeting with Israeli officials in East Jerusalem has the effect of attempting to legitimize the illegal situation on the ground and may be deemed as aiding, abetting or otherwise assisting illegal Israeli policies," he wrote Friday.
"As such, Canada’s actions are tantamount to complicity in ongoing Israeli violations of the international laws of war," Erekat wrote.
The New Democrats have called Baird’s meeting a major misstep, saying it has undermined Canada's ability to play a constructive role in building peace.