Australia has no intention of moving its embassy in Israel despite Donald Trump officially recognising Jerusalem as the country's capital, and relocating the US embassy to that city.
Foreign Minister Julie Bishop has joined other world leaders to comment on Mr Trump's controversial move, saying Australia will not relocate its embassy to Jerusalem.
The US president's administration has overturned decades of American policy and will begin the process of moving its embassy from Tel Aviv, but Ms Julie Bishop insists Australia does not support the plan.
"We will not be taking steps to move our embassy in Israel, it will continue to offer diplomatic assistance in Tel Aviv," she told reporters on Thursday.
Australia is committed to a two-state solution in the hotly disputed area.
Whereby the Israeli people and the Palestinian people can live in peace side-by-side within internationally recognised boundaries remains our foreign policy objective
Julie Bishop said.
President Trump's decision has been labelled a declaration of war by some Palestinian commentators.
Ms Bishop admitted she was concerned by action from any side that could inflame tensions.
"However, the Australian government remains committed and optimistic that the way to achieve enduring peace between the Israelis and Palestinians is a negotiated two-state solution."
Reactions were mixed among other parliamentarians.
Liberal Democrats senator David Leyonhjelm welcomed Mr Trump's call, laying the blame for stalled peace talks in the Middle East with Palestine.
"They really don't want peace in any permanent sense. Otherwise all the money will dry up," he said.
Greens Senator Janet Rice said it was an extraordinarily provocative move by the US.
"For Trump to be taking this action is just going to be increasing hostilities," she told reporters.
President of the Palestinian Authority Mahmoud Abbas condemned US President Donald Trump's decision claiming it was a dangerous move.
Mr Abbas said the US could no longer be peace brokers and the decision would be tantamount to the nation abdicating as a mediator in the region.
The secretary-general of the Palestine Liberation Organisation said US President Donald Trump's decision on Wednesday destroys any hopes for a two-state solution to the conflict.
"He destroyed the two-state solution," Saeb Erekat, who served as a top Palestinian negotiator, told journalists after Mr Trump's speech.
Trump "disqualified his country from any role whatsoever" in the peace process, he said.
"As a chief Palestinian negotiator, how can I sit with these people if they dictate on me the future of Jerusalem as Israel's capital," he added.
Mr Erekat warned that "it is really throwing the whole region into chaos, international chaos."
The two-state solution has long been the basis of international peace efforts for the conflict.
Australia has no intention of moving its Israeli embassy despite Mr Trump's announcement.
"We placed our embassy in Tel Aviv and we have no plans to move it," Foreign Minister Julie Bishop told ABC radio on Thursday.
Iran strongly condemned US President Donald Trump's decision to recognise Jerusalem as the capital of Israel on Wednesday, saying it threatened a "new intifada", or uprising.
The provocative and unwise decision by the US... will provoke Muslims and inflame a new intifada and an escalation of radical, angry and violent behaviour.
Iranian foreign ministry statement
The statement said Trump's move was a "clear violation of international resolutions" and that Jerusalem was "an inseparable part of Palestine".
Supreme Leader Ayatollah Ali Khamenei said earlier in the day that the United States is trying to destabilize the region and start a war to protect Israel's security.
Israel claims all of Jerusalem as its undivided capital, while the Palestinians see the eastern sector of the city as the capital of their future state.
"I think tonight he is strengthening the forces of extremists in this region as no one has done before," Erekat said, referring to Trump.
Prime Minister for Israel Benjamin Netanyahu has thanked Mr Trump for his "historic decision".
He said the Jewish people and the Jewish state will be forever grateful to Mr Trump.
Palestinian Islamist group Hamas said US President Donald Trump's recognition of Jerusalem as Israel's capital and decision to move the U.S. embassy to the city was a "flagrant aggression against the Palestinian people".
Hamas, which dominates the Gaza Strip, urged Arabs and Muslims to "undermine the U.S. interests in the region" and to "shun Israel."
Turkey also slammed the decision as irresponsible.
"We condemn the irresponsible statement of the U.S. administration... declaring that it recognises Jerusalem as the capital of Israel and it will be moving the U.S. Embassy in Israel to Jerusalem," the foreign ministry said in a statement.
"We call upon the US Administration to reconsider this faulty decision which may result in highly negative outcomes and to avoid uncalculated steps that will harm the multicultural identity and historical status of Jerusalem," it said.
Europe and UK
French President Emmanuel Macron on Wednesday branded as "regrettable" his US counterpart Donald Trump's decision to recognise Jerusalem as Israel's capital, calling for efforts to "avoid violence at all costs".
Addressing a press conference during a state visit to Algeria, Macron affirmed "the attachment of France and Europe to the two-state solution, Israel and Palestine living side by side in peace and security within internationally recognised borders, with Jerusalem as the capital of the two states."
He called for "calm" and "responsibility" on all sides. "We must avoid violence at all costs and prioritise dialogue," he said.
"France is ready with its partners to take all necessary initiatives in this direction."
British Prime Minister Theresa May disagrees with the US decision to recognise Jerusalem as the capital of Israel because it is unlikely to help efforts to bring peace to the region, her spokesman said on Wednesday.
"We disagree with the U.S. decision to move its embassy to Jerusalem and recognise Jerusalem as the Israeli capital before a final status agreement," the spokesman said.
"We believe it is unhelpful in terms of prospects for peace in the region."
First Minister of Scotland Nicola Sturgeon called the move "reckless" and agreed with the international community's reaction.