Israelis are eagerly watching to see whether he renews a waiver due to expire just before midnight on Thursday.
Israelis are eagerly watching to see whether he renews a waiver due to expire just before midnight on Thursday delaying the move, as his predecessors have done.
He is expected to sign the waiver, at least for now, as he seeks ways to restart Israeli-Palestinian peace efforts.
Here are five questions and answers explaining the issue:
Israel seized control of Palestinian east Jerusalem from Jordan during a 1967 war and later annexed it. The move was never recognised by the international community but Israel declared the city its undivided capital.
The Palestinians see east Jerusalem as the capital of their future state.
No countries have accepted Israeli sovereignty and have their embassies in the commercial capital Tel Aviv instead.
Moving the embassy would be seen as the United States endorsing Israel's claim to the city and rejecting the Palestinian one.
In 1995 the US Congress passed the Jerusalem Embassy Act calling on the country to move its embassy to the Holy City.
"Since 1950, the city of Jerusalem has been the capital of the State of Israel," it said, demanding the government move the embassy.
The act is binding on governments but there was a clause that presidents could delay it for six months at a time to protect "national security interests."
Presidents Bill Clinton, George W Bush and Barack Obama signed these waivers routinely every six months. Obama signed his final one in December which expires at 11:59 pm Washington time on Thursday (0359 GMT Friday).
During the election campaign, Trump promised multiple times to move the embassy, and his new ambassador David Friedman is a strong advocate of the shift.
However, Trump has appeared to back away from the idea since taking office to power under pressure from the Palestinians and other Arab leaders.
During a trip to Israel and the Palestinian territories last week he didn’t mention moving the embassy.
And as he seeks to inject new life into moribund peace talks, Trump may be wary of a move that would infuriate the Arab world.
"He will probably renew the waiver for another six months, but will come out with a statement saying he won’t necessarily do it again depending on the way in which the parties behave," Alan Baker, a former Israeli ambassador turned analyst, told AFP.
If Trump chooses not to sign the waiver, the embassy wouldn't move immediately, but there are rapid repercussions.
Under the 1995 act, the US State Department would see a 50-percent cut in all its future budgets for "acquisition and maintenance of buildings abroad" until the new embassy opens.
In 2016, $968 million was spent on embassy security, construction and maintenance, according to State Department figures.
Eugene Kontorovich, a law professor at Northwestern University in the United States and a backer of the move, says doing so would earn Trump credit with his supporters.
"It was an explicit campaign promise; doing it would help solidify his base and would help shore up support from congressional Republicans," he told AFP.
US evangelical Christian leader Laurie Cardoza-Moore, president of Proclaiming Justice to the Nations, said many of Trump's religious voters were watching carefully to ensure he didn't renege on his promise.
"The embassy move pledge was a game changer for many evangelicals," she said.
Palestinians have warned of potential violence and even a new intifada, or uprising, if the embassy were to move, saying it would strengthen radicals.
An official earlier this year said moving the embassy would open up "the gates of hell," claims Israel rejects.