After speaking with Israeli Prime Minister Benjamin Netanyahu, Morales wrote to Guatemalans on his Facebook page that "one of the most important topics was the return of Guatemala's embassy to Jerusalem," from Tel Aviv where it is currently located.
"For this reason I am informing you that I have given instructions to the foreign ministry that it start the necessary respective coordination to make this happen," Morales wrote.
Guatemala's leader made the announcement on Christmas Eve, three days after two-thirds of UN member states rejected Trump's decision to have the United States recognize Jerusalem as Israel's capital.
In all, 128 nations voted to maintain the international consensus that Jerusalem's status can only be decided through peace negotiations between Israelis and Palestinians.
Only eight countries stood with the United States in voting no to the resolution held in the UN General Assembly, among them Guatemala and fellow Central American country Honduras.
Guatemala and Honduras are both reliant on US funding to improve security in their gang-ridden territories.
The two nations are, along with El Salvador, in what is known as the Northern Triangle of Central America. Violence, corruption and poverty have made them the main source of illegal migration to the United States, which is giving them $750 million to provide better conditions at home.
Morales, like Trump, was a television entertainer with no real political experience before becoming president of Guatemala in 2016.
Guatemala is 'pro-Israeli'
On Friday, Morales foreshadowed the decision he was to make regarding Jerusalem, as he defended his government's vote at the UN backing the United States.
"Guatemala is historically pro-Israeli," he told a news conference in Guatemala City.
"In 70 years of relations, Israel has been our ally," he said.
"We have a Christian way of thinking that, as well as the politics of it, has us believing that Israel is our ally and we must support it. Despite us only being nine in the world (in the UN vote), we have the total certainty and conviction that this is the right path."
Morales's position has become fragile in recent months because of allegations of corruption against him being investigated by a special UN-backed body working with Guatemalan prosecutors.
The United States ambassador to the UN, Nikki Haley, had said her country would "take names" of the states opposing its position, and Trump threatened to cut funding to countries "that take our money and then vote against us."
Several significant US allies abstained from the UN vote, among them Australia, Canada, Mexico and Poland.
Others, such as Britain, France, Germany and South Korea were in the majority of 128 nations denouncing any unilateral decision to view Jerusalem as Israel's capital.
The eight countries on the US side of the vote were: Guatemala, Honduras, Israel, the Marshall Islands, Micronesia, Nauru, Palau and Togo.
Following the US decision on Jerusalem, Palestinian president Mahmud Abbas said he would "no longer accept" any peace plan proposed by the US, dealing a pre-emptive blow to a new initiative expected by Washington next year.
Trump has tasked his son-in-law Jared Kushner, who had no prior experience in government, with spearheading the complicated peace plan efforts.
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