The US move fulfilled a pledge by President Donald Trump, who has recognised the holy city as the Israeli capital, but it has fired Palestinian anger and drawn criticism from many foreign governments as a set back to peace efforts.
The United States officially opened its deeply controversial Jerusalem embassy on Monday in a ceremony that included a video address by President Donald Trump.
Trump told the ceremony that the United States remained committed to reaching a lasting Middle East peace though the move of its embassy in Israel from Tel Aviv to Jerusalem has provoked outrage.
A plaque and seal was unveiled at the ceremony officially opening the embassy.
At the embassy inauguration ceremony, Israeli Prime Minister Benjamin Netanyahu thanked Trump for "having the courage to keep your promises".
"What a glorious day for Israel," Netanyahu said in a speech. "We are in Jerusalem and we are here to stay."
Earlier in the day, violent clashes erupted along the Gaza Strip's border, leaving at least 52 Palestinians dead from Israeli fire and over 2,000 wounded in the conflict's bloodiest day in years.
Tens of thousands had gathered near the border in protest while smaller numbers of stone-throwing Palestinians approached the fence and sought to break through, with Israeli snipers positioned on the other side.
US ambassador to Israel David Friedman also spoke at the ceremony in Jerusalem and Trump was given a standing ovation when he mentioned him.
Friedman referred to the embassy's location as "Jerusalem, Israel" drawing wild applause.
US Deputy Secretary of State John Sullivan led the Washington delegation at the inauguration that also included Trump's daughter Ivanka and her husband Jared Kushner, both White House aides, as well as Treasury Secretary Steven Mnuchin.
Some 800 guests were attending the ceremony.
Today, thanks to the leadership of @POTUS, we celebrate history in the making... the opening of the US Embassy in Jerusalem, the capital of the State of Israel. America stands with Israel!— Vice President Mike Pence (@VP) May 14, 2018
Status of Jerusalem
Jerusalem's status is perhaps the thorniest issue in the Israeli-Palestinian conflict.
Israel considers the entire city its capital, while the Palestinians see east Jerusalem as the capital of their future state.
Trump's recognition of contested Jerusalem as Israel's capital in December outraged Palestinians, who said the United States could no longer serve as an honest broker in any peace process with Israel.
Israel regards all of the city, including the eastern sector it captured in the 1967 Middle East war and annexed, as its "eternal and indivisible capital" in a move that has not won international recognition.
Most countries say the status of Jerusalem - a sacred city to Jews, Muslims and Christians - should be determined in a final peace settlement and that moving their embassies now would prejudge any such deal. Peace talks aimed a finding a two-state solution to the conflict have been frozen since 2014.
TRT World's Soraya Lennie reports.
Global reactions to US move
The move has fired Palestinian anger and drawn criticism from many foreign governments as a set back to peace efforts.
In London, the British government said it had no plans to move its Israel embassy from Tel Aviv to Jerusalem, and said it disagreed with the US decision to do so.
The Russian government said it feared the embassy move would increase tensions across the Middle East.
French Foreign Minister Jean-Yves Le Drian said the US move flouted international law.
"France calls on all actors to show responsibility to prevent a new escalation," Le Drian said in a statement.
The US administration has lost its role as a mediator in the Middle East with its decision to recognise Jerusalem as the capital of Israel, Turkish President Recep Tayyip Erdogan said on Monday.
The UN's Guterres, speaking to reporters in Vienna, said the Gaza bloodshed showed the need for a political solution. "There is no Plan B to a two-state solution in which Israelis and Palestinians can live in peace," he said.
The Afghan Taliban, in a rare comment on matters outside Afghanistan, condemned the US Embassy move and called on Muslim countries to oppose it.
Trump peace plan
The Trump administration has nearly completed a long-awaited Israeli-Palestinian peace plan but is undecided on how and when to roll it out, given Palestinians' outrage over the embassy move and their contention that Washington can no longer be an honest broker.
Palestinian Prime Minister Rami Hamdallah, in a statement on Monday, accused the United States of "blatant violations of international law".
The protests are scheduled to culminate on Tuesday, the day Palestinians mourn as the "Nakba" or "Catastrophe" when, in 1948, hundreds of thousands of them were driven out of their homes or fled the fighting around Israel's creation.
"Choosing a tragic day in Palestinian history (to open the Jerusalem embassy) shows great insensibility and disrespect for the core principles of the peace process," Hamdallah wrote.