In a statement, the Gulf kingdom said President Donald Trump’s announcement was “unjustified and irresponsible”.
But Israeli PM Benjamin Netanyahu hailed it as “a historic day”.
President Trump’s move reversed decades of US policy. The fate of Jerusalem is one of the thorniest issues between Israel and the Palestinians.
Eight of the 15 nations who are currently members of the United Nations Security Council have called for the body to hold an urgent meeting on the US decision by the end of the week.
Why is this significant?
Mr Trump’s Wednesday announcement puts the US at odds with the rest of the international community’s view on Jerusalem’s status.
The Palestinians claim East Jerusalem as the capital of a future state, and according to the 1993 Israel-Palestinian peace accords, its final status is meant to be discussed in the latter stages of peace talks.
Israeli sovereignty over Jerusalem has never been recognised internationally, and until now all countries have maintained their embassies in Tel Aviv.
Jerusalem contains sites sacred to the three major monotheistic faiths – Judaism, Islam and Christianity.
East Jerusalem, which includes the Old City, was annexed by Israel after the Six Day War of 1967, but is not internationally recognised as part of Israel.
What did Trump say?
The US president said he had “judged this course of action to be in the best interests of the United States of America, and the pursuit of peace between Israel and the Palestinians”.
He said he was directing the US state department to begin preparations to move the US embassy from Tel Aviv to Jerusalem.
Despite warnings of regional unrest over any such move, the decision fulfils a campaign promise and appeals to Mr Trump’s right-wing base.
“Today, I am delivering,” the US leader said.
Recognising Jerusalem as Israel’s capital was “nothing more or less than a recognition of reality”, he added. “It is also the right thing to do.”
The Republican Jewish Coalition have already thanked the president in a New York Times ad.
Mr Trump said the US still supported a two-state solution to the longstanding Israeli-Palestinian conflict, if approved by both sides, which would essentially see the creation of an independent Palestinian state living alongside Israel.
What do Israel and the Palestinians say?
In response, Mr Netanyahu said Israel was profoundly grateful to President Trump.
“Jerusalem has been the focus of our hopes, our dreams, our prayers for three millennia,” he tweeted.
Meanwhile, the US has asked Israel to temper its response to Mr Trump’s announcement because Washington expects a backlash, Reuters news agency reports citing a state department document.
Palestinian President Mahmoud Abbas said the city was the “eternal capital of the state of Palestine”.
He called Mr Trump’s announcement “deplorable”, saying the US could no longer be a peace broker.
There were demonstrations in Gaza against the decision before it was announced in response to a call from the Islamist Hamas movement that runs the Gaza strip, local pro-Hamas media reported.
Hamas said that Mr Trump’s decision would “open the doors of hell” on US interests in the region.
What does the rest of the world say?
The Arab and the wider Muslim world – including a number of US allies – condemned Mr Trump’s announcement:
Demonstrations have already taken outside the US consulate in Istanbul, Turkey.
“The US move represents a significant decline in efforts to push a peace process and is a violation of the historically neutral American position on Jerusalem,” the Saudi royal court said.
Malaysian PM Najib Razak called on Muslims everywhere to “make it clear that we strongly oppose” the US move.
UN Secretary General Antonio Guterres said it was “a moment of great anxiety”. He said “there is no alternative to the two-state solution”.
In other reaction:
- British PM Theresa May said she disagreed with the US decision, which was “unhelpful in terms of prospects for peace in the region”
- German Chancellor Angela Merkel and French President Emmanuel Macron both said their countries did not support the move
- EU chief diplomat Federica Mogherini voiced “serious concern”
