Netanyahu said the controversial announcement by US President Donald Trump -- which prompted diplomatic alarm and street protests across the Islamic world -- had "put facts squarely on the table".
As he arrived for talks in Brussels, Netanyahu said he expected "all or most" European countries would follow the US -- but the 28-nation bloc's foreign policy head Federica Mogherini gave him a stern rebuff, telling him to "keep his expectations for others".
"It doesn't obviate peace, it makes peace possible, because recognising reality is the substance of peace, it's the foundation of peace," Netanyahu said in a statement alongside Mogherini ahead of a breakfast meeting with EU foreign ministers.
"I believe that all or most of the European countries will move their embassies to Jerusalem, recognise Jerusalem as Israel's capital, and engage robustly with us for security, prosperity and peace," Netanyahu said.
After nearly two hours of talks between Netanyahu and the EU ministers, Mogherini gave a flat rejection of his suggestion they could follow Trump.
"He can keep his expectations for others, because from the European Union member states' side this move will not come," she said, adding that the bloc -- the Palestinians' largest donor -- would stick to the "international consensus" on Jerusalem.
She reiterated the EU's stance that "the only realistic solution" for peace is two states -- Israel and Palestine -- with Jerusalem as the capital of both and the borders returned to their status before the 1967 Arab-Israeli War.
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