Speaking at the White House on Wednesday, Trump said he had "determined it is time to officially recognize Jerusalem as the capital of Israel," adding that the move was a "recognition of reality."
Flouting numerous warnings from Arab and European leaders, Trump said he was directing his government to begin preparations to move the US embassy from Tel Aviv to Jerusalem. He said he was acting under a 1995 law that required the United States to relocate its diplomatic mission to Jerusalem.
"While previous presidents have made this a major campaign promise, they failed to deliver," he said. "Today, I am delivering."
US Secretary of State Rex Tillerson said afterwards that the US would immediately begin implementing plans to relocate the embassy.
Israeli Prime Minister Benjamin Netanyahu hailed Trump's announcement as a "historic landmark." His, however, was the only country to applaud the move.
Trump pledges to continue peace process
Despite facilitating the move, which is bound to stoke tensions in the region, Trump vowed to do everything in his power to help forge a peace deal between Israelis and Palestinians.
Recognizing Jerusalem as the capital was part a new approach to the Middle East peace process, Trump said, without going into further detail.
He also said his government remained committed to a two-state solution and that the "status quo" should remain for the Temple Mount as a holy site for three major religions.
However, the move breaks away with decades of foreign policy in the Middle East. Despite Israel having prodded the US for decades to recognize Jerusalem as the capital, presidents had refrained in an effort to remain neutral as the contested city's borders are still to be determined in a hoped-for peace deal.
By recognizing Israel's claim to Jerusalem, Trump is seen by the Palestinians as siding with Israel on one of the most sensitive issue in the conflict. The Palestinians have demanded that east Jerusalem - which Israel captured in 1967 - be recognized as their capital.
Palestinian negotiator: US 'disqualified' from peace process
In an immediate response to Trump's announcement, the secretary-general of the Palestine Liberation Organization (PLO) warned that the US' decision to recognize Jerusalem as the Israeli capital effectively destroyed the chance a two-state solution.
PLO Secretary-General Saeb Erekat, who has long served as one of the Palestinians' top negotiators, said that Trump had "disqualified his country from any role whatsoever" in the future peace process. "As a chief Palestinian negotiator, how can I sit with these people if they dictate on me the future of Jerusalem as Israel's capital," he added.
Palestinian leader Mahmoud Abbas echoed those remarks, saying in a speech that Trump's move amounted to "an announcement of US withdrawal from playing the role it has been playing in the past decade in sponsoring the peace process."
Abbas added: "These deplorable and unacceptable measures deliberately undermine all peace efforts."
Protests erupt in the Palestinian territories
Leading up to Trump's announcement, hundreds of Palestinians rallied across the Gaza Strip, burning Israeli and US flags, as well as pictures of Trump. There were also reports of small clashes in the flashpoint West Bank city of Hebron, although there were no reports of injuries.
Palestinian officials also called for three days of protests — or what have been dubbed "days of rage" — starting Wednesday.
Some US embassies in the Middle East issued warning to government officials and their families to exercise caution in the vicinity of any large protests and remain cautious.
Regional and international leaders respond
Trump's announcement prompted a spate of reaction from across the world.
The speaker for German Chancellor Angela Merkel said the German government does not support the US' position, because Jerusalem's status was still to be settled as part of negotiations on a two-state solution.
The European Union's chief diplomat Federica Mogherini warned that Trump's announcement could have "repercussions" on the prospect of peace, adding that "the aspirations of both parties (Israelis and Palestinians) must be fulfilled and a way must be found through negotiations to resolve the status of Jerusalem as the future capital of both states."
France's President Emmanuel Macron, meanwhile, said Trump's Jerusalem move was 'regrettable" and that it "contravenes international law and U.N. Security Council resolutions." He also called for calm from all sides, with violence avoided.
United Nations Secretary General Antonio Guterres, meanwhile, said he would "do everything in my power to support the Israeli and Palestinian leaders to return to meaningful negotiations, adding that there was "no alternative" to the two-state solution.
Egypt, one of two Arab nations to have diplomatic links with Israel, also decried the move. "Such unilateral decisions violate international legitimacy resolutions and will not change the legal status of the city of Jerusalem as being under occupation," Egypt's foreign ministry said in a statement.
Jordan, the other Arab nation with official links to Israel, warned that the move violated international law. Jordanian government spokesman Mohammed Momani said the US' announcement on Wednesday "constitutes a violation of decisions of international law and the United Nations charter."
Read more: Arab world warns US not to recognize Jerusalem as Israeli capital|Turkish Foreign Minister Mevlut Cavusoglu wrote on Twitter that the move was "irresponsible" and that "the decision is against international law and relevant UN resolutions."
Other reactions were less diplomatic. Hamas, the militant organization that in recent years has governed the Gaza Strip, warned that Trump's decision would "open the gates of hell" on US interests in the region.
More to follow
dm/jm (Reuters, AP)