The US Embassy to Israel will be in a zone of East Jerusalem considered occupied territory under international law, according to the Washington Post.
Part of the diplomatic compound that is scheduled to open as the embassy in just two months lies in the contested No Man's Land between East and West Jerusalem. Israel took control of the area in the 1967 war and so it is still considered occupied territory by the United Nations, although the US relies on the fact that Israel and Jordan had informally divided management of the contested enclave.
The provisional embassy site in the Arnona neighbourhood has reportedly been used by Israelis since 1949, the US State Department said in a statement last week. However, the Palestinian Liberation Authority (PLO) has denied that is the case.
"No Man's Land is occupied territory," said Ashraf Khatib of PLO's Negotiations Affairs Department. "Any permanent status for that territory should be part of a final status negotiation."
The site has already played host to the US Consulate General in Jerusalem for the past seven years and will now host the official embassy until a more permanent location can be identified.
Read: Trump says he may travel to Israel for embassy move, Netanyahu calls out Iran
Yet according to Eugene Kontorovich, the director of international law at the conservative Jerusalem-based Kohelet Policy Forum, the embassy move to the Arnona site is the Trump administration's de facto recognition of Israel's sovereignty over the areas it captured in the 1967 war.
"Much more important than what the State Department says, it is what their actions say," Kontorovich said. "You don't build an embassy in territory that is not sovereign to Israel."
The decision to move the embassy follows US President Donald Trump's recognition of Jerusalem last year that caused outrage across the world. Guatemala has also followed suit, with the Latin-American country set to move its embassy in Israel to Jerusalem from Tel Aviv in May, two days after the US.
In response to the proposed relocation of the embassy, Saeb Erekat, the Palestinian Authority's (PA) chief negotiator, said the move shows a "determination to violate international law, destroy the two-state solution and provoke the feelings of the Palestinian people as well as of all Arabs, Muslims and Christians around the globe."
Since the US declaration, the PA has been reluctant to engage in the peace process with the Trump administration as the sole mediator, considering it a biased negotiator.
Read: 'We have no option but to suspend recognition of Israel', says Erekat