According to this site (which is affiliated with the Jewish Internet Association):

Palestine Facts.org

...the title of Grand Mufti was created by Sir Herbert Samuel, who was serving as the British, Palestine High Commissioner at the time.

"The first Palestine High Commissioner. Sir Herbert Samuel arrived in Palestine on July 1, 1920. He was a weak administrator who was too ready to compromise and appease the extremist, nationalistic Arab minority led by Haj Amin al-Husseini. When the existing Arab Mufti of Jerusalem (religious leader) died in 1921, Samuels was influenced by anti-Zionist British officials on his staff. He pardoned al-Husseini and, in January 1922, appointed him as the new Mufti, and even invented a new title of Grand Mufti. He was simultaneously made President of a newly created Supreme Muslim Council. Al-Husseini thereby became the religious and political leader of the Arabs.

The appointment of the young al-Husseini as Mufti was a seminal event. Prior to his rise to power, there were active Arab factions supporting cooperative development of Palestine involving Arabs and Jews. But al-Husseini would have none of that; he was devoted to driving Jews out of Palestine, without compromise, even if it set back the Arabs 1000 years.

William Ziff, in his book "The Rape of Palestine," summarizes:

Implicated in the [1920] disturbances was a political adventurer named Haj Amin al Husseini. Haj Amin, was sentenced by a British court to fifteen years hard labor. Conveniently allowed to escape by the police, he was a fugitive in Syria. Shortly after, the British then allowed him to return to Palestine where, despite the opposition of the muslim High Council who regarded him as a hoodlum, Haj Amin was appointed by the British High Commissioner as Grand Mufti of Jerusalem for life. [P. 22]

Al-Husseini represented newly emerging proponents of militant, Palestinian Arab nationalism, a previously unknown concept. Once he was in power, he began a campaign of terror and intimidation against anyone opposed to his rule and policies. He killed Jews at every opportunity, but also eliminated Arabs who did not support his campaign of violence. Husseini was not willing to negotiate or make any kind of compromise for the sake of peace.

In 1929, major Arab riots were instigated against the Jews of Palestine . They began when al-Husseini falsely accused Jews of defiling and endangering local mosques, including al-Aqsa. The call went out to the Arab masses: "Itbakh al-Yahud!" — "Slaughter the Jews!" After the killing of Jews in Hebron, the Mufti disseminated photographs of slaughtered Jews with the claim that the dead were Arabs killed by Jews.

In April, 1936 six prominent Arab leaders formed the Arab Higher Committee, with the Grand Mufti Haj Amin al-Husseini as head of the organization, joining forces to protest British support of Zionist progress in Palestine. In the same month, riots broke out in Jaffa commencing a three-year period of violence and civil strife in Palestine that is known as the Arab Revolt . The Arab Higher Committee led the campaign of terrorism against Jewish and British targets.

Using the turmoil of the Arab Revolt as cover, al-Husseini consolidated his control over the Palestinian Arabs with a campaign of murder against Jews and non-compliant Arabs, the recruitment of armed militias, and the raising of funds from around the Muslim world using anti-Jewish propaganda. In 1937 the Grand Mufti expressed his solidarity with Germany, asking the Nazi Third Reich to oppose establishment of a Jewish state, stop Jewish immigration to Palestine, and provide arms to the Arab population. Following an assassination attempt on the British Inspector-General of the Palestine Police Force and the murder by Arab extremists of Jews and moderate Arabs, the Arab Higher Committee was declared illegal by the British. The Grand Mufti lost his office of President of the Supreme muslim Council, his membership on the Waqf committee, and was forced into exile in Syria in 1937. The British deported the Arab mayor of Jerusalem along with other members of the Arab Higher Committee."


Note that the majority of Arabs didn't want Haj Amin al-Husseini in any position of power (they considered him a hoodlum), that they didn't support him, that they were not in agreement with his agenda, and that he was as brutal to Arabs who opposed him as he was to Jews. So I think it's safe to say that we can blame the British for much of the bloodshed and violence between the Palestinians and the Israelis in the intervening decades.