Chanting slogans including "Jerusalem is ours and will remain so!" and "down with America, down with Israel", the protesters marched after prayers at the Ottoman Fatih mosque in the centre of Istanbul, the correspondent added.
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Other protests took place elsewhere in Istanbul, Ankara and across Turkey on Friday.
"We consider Jerusalem as the bastion of the Muslim community... We are here to show our unity and our strength. Nobody can deter us," said protester Doguhan, 17.
Some protesters threw a placard with a picture of Trump and the slogan "servant of Zionism" to the ground and stamped on it with their feet.
Merve, a student, said she and her classmates had left their school to attend the protest, describing the US decision as "null and void".
"What Trump says is empty words and means nothing to us. Whenever we see the name of Israel on a map, we cross it out and write Palestine," she added.
- 'Islamic Union'-
Turkey's President Recep Tayyip Erdogan has taken a strong line against the move and called an emergency summit meeting of the Organisation of Islamic Cooperation (OIC) on December 13 in Istanbul.
Last year, Turkey and Israel ended a rift triggered by Israel's storming in 2010 of a Gaza-bound ship that left 10 Turkish activists dead and led to a downgrading of diplomatic ties.
The two sides have since stepped up cooperation, particularly in energy, but Erdogan, who regards himself as a champion of the Palestinian cause, is still often bitterly critical of Israeli policy.
The protesters marching from Fatih mosque converged with another group at Sarachane park. Palestinians, Egyptians and Syrians were among them.
Bulent Yildirim, head of the pro-government Islamic charity Humanitarian Relief Foundation (IHH), which helped organise the protest, condemned Trump's declaration over Jerusalem.
"In fact we must thank Trump. For years we couldn't tell the Islamic world about the great Satan. With one decision, he proved that America is the great Satan," he said in an address.
Yildirim said after Trump's move, "With God's permission, we can hear the coming of a future Islamic Union," prompting the crowds to chant: "Not European, but Islamic Union."
In Ankara, a group of protesters tried to burn the Israeli flag in front of the US embassy but police did not allow it. An unknown number were detained, an AFP photographer said.
A champion of the Palestinian cause, Erdogan on Thursday lashed out at Trump's Jerusalem plan and said it would put the region in a "ring of fire."
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