The status of Jerusalem has therefore long been a key issue in the peace process, and Palestinian officials have said that any change to the city's status would be destructive.
Any decision by the U.S.to recognize Jerusalem as Israel's capital would be rife with political peril.
Israeli police are preparing for the kind of demonstrations that often turned into violent clashes after protests broke out at the al-Aqsa Mosque in July.
The Palestinians have said the move would mean the "kiss of death" to the two-state solution.
While Israel's leaders will likely welcome Trump's move, it's believed the country's security establishment is less enthusiastic. The U.S. has consular offices in Jerusalem, but it's unlikely that they would be suitable for a permanent embassy. The statement also issued restrictions on U.S. government employees' personal and official travel for certain areas of Israel.
Alas, no. There isn't a single policy that can be pointed to by this administration that might be offered as evidence to support the idea that the US president has supported the ending of the occupation.
As a result, all countries with diplomatic missions to Israel maintain their embassies about 60 kilometres down Highway 1 in Tel Aviv.
Abbas warned Trump of the "dangerous consequences" that moving the embassy would have for peace efforts and regional stability, Abbas spokesman Nabil Abu Rdainah said.
Vice President Mike Pence and David Friedman, U.S. ambassador to Israel, pushed hard for both recognition and embassy relocation, while Secretary of State Rex Tillerson and Defense Secretary Jim Mattis opposed the move from Tel Aviv, according to other U.S. officials who spoke on condition of anonymity.
Still, deliberations over the status of Jerusalem were tense. The official did not have direct knowledge of the specifics of the call.
Under American law, the president must sign a waiver every six months that leaves the embassy in Tel Aviv.
If the US recognises Jerusalem as Israel's capital, it would reinforce Israel's position that settlements in the east are valid Israeli communities.
Jerusalem's Old City includes the holiest ground in Judaism.
He cautioned the Palestinians against reacting to Trump's announcement with violence.
Trump is to publicly address the question of Jerusalem today.
One administration official on Tuesday defended Trump's planned action, saying the "policy of ambiguity" has not worked in 22 years and the president does not believe the issue will be resolved by ignoring "the simple truth" that Jerusalem is the capital of Israel. It could cause violence, given the symbolism of certain addresses in the Middle East.
Egyptian President Abdul Fattah al-Sisi also stressed in a telephone call he received from Trump to brief him on his decision to move the US embassy to Jerusalem the importance of preserving the legal status of Jerusalem as stated in international references and resolutions, urging not to complicate the matter in the region through measures that could undermine chances of peace.