The US officials added that the president would be signing a regular waiver blocking the embassy’s move from Tel Aviv to Jerusalem until the new building was completed.
Ahead of his formal announcement, Mr Trump phoned several regional leaders to tell them he intended to move the US embassy from Tel Aviv to Jerusalem.
What’s been the world reaction?
Before the confirmation of the US move, Saudi Arabia’s King Salman bin Abdulaziz al-Saud told Mr Trump that the relocation of the embassy or recognition of Jerusalem as Israel’s capital “would constitute a flagrant provocation of Muslims, all over the world”.
The White House said the president spoke to Middle East leaders including Israeli Prime Minister Benjamin Netanyahu on Tuesday.
Among the reaction from those leaders:
Palestinian leader Mahmoud Abbas warned “of the dangerous consequences such a decision would have to the peace process and to the peace, security and stability of the region and of the world”
Jordan’s King Abdullah said the decision would “undermine efforts to resume the peace process” and provoke Muslims. Jordan acts as custodian of the Islamic sites in Jerusalem
Egypt’s President Abdul Fattah al-Sisi urged Mr Trump “not to complicate the situation in the region”
US government employees and their families have been barred from personal travel in Jerusalem’s Old City and the West Bank for security reasons ahead of planned protests.
Turkish President Recep Tayyip Erdogan warned his country could sever ties with Israel if the US recognised Jerusalem as its capital.
And Ismail Haniya, the chief of the Islamist Hamas group that runs Gaza, said a shift of the embassy and recognition of Jerusalem as the Israeli capital would cross “every red line”.
France, the European Union and the Arab League have also expressed concern.
Israel’s intelligence minister Israel Katz told Army Radio that Israel was “preparing for every option”, including an outbreak of violence.
What is so contentious about Jerusalem’s status?
The issue goes to the heart of Israel’s conflict with the Palestinians, who are backed by the rest of the Arab and wider Islamic world.
The city is home to key religious sites sacred to Judaism, Islam and Christianity, especially in East Jerusalem.
Israel occupied the sector, previously occupied by Jordan, in the 1967 Middle East war and regards the entire city as its indivisible capital.
The Palestinians claim East Jerusalem as the capital of a future state, and according to 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 all countries, including Israel’s closest ally the US, maintain their embassies in Tel Aviv.
Since 1967, Israel has built a dozen settlements, home to about 200,000 Jews, in East Jerusalem. These are considered illegal under international law, though Israel disputes this.
If the US recognises Jerusalem as Israel’s capital, it would reinforce Israel’s position that settlements in the east are valid Israeli communities.
This story is from The BBC News. To read the full story, please go to http://www.bbc.co.uk/news/world-middle-east-42246564.