Trump described the move as "a long overdue step" to advance the Middle East peace process, the BBC reported.
The President said his country would support the two-state solution if both Israel and Palestine approved.
Palestinian President Mahmoud Abbas' spokesman had warned that the development would hold dangerous consequences for the region.
Earlier in the day, Palestinians declared three days of rage, starting on Wednesday, after the Trump informed Abbas in a telephone call of his plans regarding Jerusalem.
Chief of the Islamic Hamas movement Ismail Haniyeh said if the US decision on Jerusalem is taken, "it means ending the peace process," reported Qatari-based news channel Al-Jazeera.
Turkish President Recep Tayyip Erdogan has strongly warned the US against the move saying it would trigger new clashes in the region and help terrorist organisations.
The Moroccan Minister of Foreign Affairs and International Cooperation, Nasser Bourita, summoned envoys of United Nations Security Council (UNSC) permanent members over mounting tensions on Jerusalem issue.
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