Following the U.S. decision on Jerusalem, Palestinian president Mahmud Abbas said he would "no longer accept" any peace plan proposed by the United States, dealing a pre-emptive blow to a new initiative expected by Washington next year.
Israel's ambassador to Guatemala, Matty Cohen, said on Army Radio that no date had been set for the embassy move, "but it will happen after" the United States relocates its own embassy to Jerusalem.
After speaking with Israeli Prime Minister Benjamin Netanyahu, Morales announced on his Facebook account that one of the most important topics they discussed was the "return of Guatemala's embassy to Jerusalem" from its current location in Tel Aviv. "I am therefore informing you that I have instructed the chancellor to initiate the process to do so".
A Palestinian died on Saturday after being wounded by Israeli fire during a protest on the Gaza border against U.S. recognition of Jerusalem as Israel's capital, the health ministry said.
The two nations are, along with El Salvador, in what is known as the Northern Triangle of Central America.
Israeli Prime Minister Netanyahu praising the decision said, "God bless you my friend, President Morales!"
Guatemala is home to about 1,000 Jews in a population of 15 million.More news: Purchase a Digital Google Play Gift Card and Save Money Immediately
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.
The resolution passed by the General Assembly declared the USA action on Jerusalem "null and void".
By a 128-9 vote Thursday, the diplomats gathered in New York City ignored US objections and approved a nonbinding resolution calling on countries to avoid moving their embassies to Jerusalem.
Several significant U.S. allies abstained from the United Nations vote, among them Australia, Canada, Mexico and Poland.
Last Thursday, the UN General Assembly overwhelmingly adopted a resolution - by a vote of 128 to 9 - calling on Trump to reverse the decision. There were also 35 abstentions and 21 countries were absent or did not vote at all.
Many governments have long said the fate of Jerusalem must be resolved through negotiations.