Kever Rachel (in Hebrew), located north of Bethlehem, is not an actual grave, but a marking spot for what is believed to be the place she was buried. According to Jewish tradition, Jacob chose to bury his wife where she died rather than in the family burial plot in the Tomb of the Patriarchs in Hebron. In Genesis 35:20: "Jacob set up a pillar upon her grave: the same is the Pillar of Rachel's grave unto this day," i.e. the time it was written. The pillar, a sepulchral monument, has long disappeared.

For a millennia, Rachel’s Grave has been a pilgrimage site for the Jewish people. Rachel herself was without children for many years and prayed fervently to be granted children. Eventually, she died in childbirth on the way to Hebron. She is considered to be the mother par excellence of the Jewish people and her tomb is one of the most frequented sites for Jewish prayer. Barren women, especially, have traditionally gone to her grave to pray. But both men and women in need, flock to "Mother Rachel’s" tomb to seek God's blessing.

Christians, Jews and Muslims, are all honoring it. The grave, which, apparently, is not older than the 15th century, was built in the Byzantine period in the style of small-domed buildings raised by Muslims in honor of their saints. In 1841, Sir Moses Montefiore renovated it and added on an anteroom and enclosed the dome over the grave marker. In the early 1990s, Israel’s Ministry of Religion renovated and enlarged the site again. The building is now housed within a reinforced edifice, and the complex includes two guard towers.

When Jacob buried Rachel, her tomb was on the roadside outside of Bethlehem. In modern times, however, the city has grown until the tomb is now in the center of town with one of the main streets passing right next to it. The area in which the grave is located is in dispute for a long time. Since 1948, a Muslim cemetery has surrounded the building on three sides. From 1948 to 1967 Jews were banned by the Jordanian government from praying at Rachel’s Grave. After the Israeli victory in the Six Day War, the Tomb was reopened to Jewish worshipers. The Israeli-Palestinian conflict caused the dispute over the grave to rise again and Israelis' access to the grave was denied for several times.

sources:
http://www.rachelstomb.org/capsulehistory.htm
http://www.jewishmediaresources.com/ncarticle/233/
http://www.nahalat-hevron.org/rachel.htm