The announcement would move Trump one step closer to fulfilling his campaign pledge to relocate the US embassy from Tel Aviv to Jerusalem -- a move long sought by Israel, but set aside by previous US Presidents due to regional concerns and Jerusalem's contested status between Israelis and Palestinians. Both sides claim the holy city as their capital.
CNN's Oren Liebermann, who is based in Jerusalem, walks us through what's at stake.
Why is declaring Jerusalem the capital such a big deal?
The final status of Jerusalem has always been one of the most difficult and sensitive questions in the Israeli-Palestinian conflict. If the United States declares Jerusalem as the capital of Israel, it would be seen as prejudging that question, deciding an issue that was supposed to be left to negotiations and breaking with the international consensus on the holy city.
Recognizing Jerusalem as the capital also moves the United States one major step closer to relocating the embassy from Tel Aviv to Jerusalem, which would be seen as cementing Israeli sovereignty over the city.
How would the embassy move work?
Logistically, moving the embassy to Jerusalem could be very simple. There is already a US consulate in Jerusalem, while the embassy remains in Tel Aviv. It could be as simple as switching the names -- making the embassy in Jerusalem and a consulate in Tel Aviv. The US Ambassador to Israel would move from his residence in a Tel Aviv suburb to Jerusalem.
But that would be just about the only simple part. Moving the embassy risks setting off diplomatic crises with Arab states that could include widespread protests outside of US diplomatic offices in those and other countries.
The ramifications of an embassy move would be felt far outside of Jerusalem. It would overturn 70 years of international consensus, and, many argue, would effectively signal the end of moves to achieve peace between Israelis and Palestinians.
Give me some history ...
The United Nations partition plan drawn up in 1947 envisaged Jerusalem as a separate "international city." But the war that followed Israel's declaration of independence one year later left the city divided. When fighting ended in 1949, the armistice border -- often called the Green Line because it was drawn in green ink -- saw Israel in control of the western half, and Jordan in control of the eastern half, which included the famous Old City.
When did that change?
During the 1967 Six-Day War, Israel occupied East Jerusalem. Since then, all of the city has been under Israel's authority. The city marks "Jerusalem Day" in late-May or early-June. But Palestinians, and many in the international community, continue to see East Jerusalem as the capital of a future Palestinian state.
Who lives in Jerusalem?
Roughly 850,000 people live in Jerusalem -- 37% are Arab and 61% are Jewish, according to the independent think tank Jerusalem Institute. The Jewish population includes around 200,000 ultra-Orthodox Jews, with the rest split generally between religious Zionist and secular Jews. 96% of the city's Arab population is Muslim; the other 4% is Christian.
The vast majority of the Palestinian population lives in East Jerusalem. Although there are some mixed neighborhoods in Jerusalem where both Israelis and Arabs live, most of the neighborhoods are split.
Have any countries ever had their embassy in Jerusalem?
Yes. Before 1980 a number of countries did, including the Netherlands and Costa Rica. But in July of that year, Israel passed a law that declared Jerusalem the united capital of Israel. The United Nations Security Council responded with a resolution condemning Israel's annexation of East Jerusalem and declared it a violation of international law.
So countries moved their embassies out of the city?
Correct. In 2006, Costa Rica and El Salvador were the last to move their embassies out of Jerusalem, joining the rest of the world in locating their embassies in Tel Aviv.
What about consulates?
Some countries do maintain consulates in Jerusalem, including the United States, which has one in the western part of the city. Other countries -- such as Britain and France for instance -- have a consulate in the eastern part of the city, which serve as their countries' main representation in the Palestinian territories.
Just to be clear: What is America's position?
The US has never had its embassy in Jerusalem. It has always been in Tel Aviv, with the Ambassador's residence in Herzliya Pituach, about 30 minutes north.
That sounds pretty straightforward ...
Wait a minute, it gets more complicated. In 1989, Israel began leasing to the US a plot of land in Jerusalem for a new embassy. The 99-year lease cost $1 per year. To this day, the plot has not been developed, and it remains an empty field.
OK. Keep going...
In 1995, the US Congress passed a law requiring America to move the embassy from Tel Aviv to Jerusalem. Proponents said the US should respect Israel's choice of Jerusalem as its capital, and recognize it as such.
So why hasn't the embassy moved yet?
Every President since 1995 -- Presidents Clinton, Bush and Obama -- has declined to move the embassy, citing national security interests. Every six months, the President has used the presidential waiver to circumvent the embassy move.
How have Israelis responded to this?
The Israeli government has lauded Trump's pledge to follow through with the embassy move. Jerusalem Mayor Nir Barkat has been perhaps the most outspoken advocate, launching a campaign just days before the US President's inauguration, urging him to make good on his promise.
And what do the Palestinians make of it all?
Palestinian leaders are adamant that an embassy move to Jerusalem would be a violation of international law, and a huge setback to peace hopes.
President Mahmoud Abbas has turned to other world leaders, including Russian President Vladimir Putin and Jordan's King Abdullah, to help pressure Trump to change his mind. The Palestine Liberation Organization has suggested it would consider revoking its recognition of Israel, and canceling all agreements between Israelis and Palestinians, should the move take place.
More immediately, there are fears it could set off a wave of unrest -- perhaps even street protests and violence -- in the Palestinian territories and across the Arab world.