The move infuriated the Palestinians, who claim Israeli-annexed east Jerusalem as their capital.
Jerusalem, which is sacred to Jews, Muslims and Christians, was decorated with roadside flowerbeds in the design of the US flag and posters reading "Trump make Israel great again".
"I think that the reluctance always before - because as has been pointed out, several previous presidents committed to move the embassy to Jerusalem - I think the hesitation has been, that it would end any prospect of an agreement between the Palestinians and the Israelis", Gates told "Face the Nation" moderator Margaret Brennan. Trump has said the opening is meant to coincide with the 70th anniversary of Israel's establishment.
Later on Saturday, Israeli war planes destroyed an underground attack tunnel near the border that was being built by Hamas, the Islamist group that controls Gaza, to help militants cross into Israel, the military said. No details of the proposal have been confirmed, though Palestinian officials, citing information from Saudi intermediaries, suspect it's an offer for a Gaza-based mini-state with parts of the West Bank and a small foothold in Jerusalem.
Israel has portrayed the movement as a "terrorist" ploy by Hamas and as a security threat to its civilians, pointing out attempts to damage and breach the fence. "Of course we will all celebrate this day, a real celebration", he said at a weekly Cabinet meeting.
Tel Aviv is the customary base for foreign embassies in Israel, with the U.S. and other countries having avoided Jerusalem because of its contested status.More news: Europe scrambles to save Iran deal
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U.S. Ambassador to Israel David Friedman greeted Deputy Secretary of State John Sullivan, Treasury Secretary Steve Mnuchin, Senior Presidential Advisor and Son-in-law Jared Kushner and Presidential Advisor and daughter Ivanka Trump, along with Israel's Chief of Protocol and the Embassy Chief of Staff. "If you're not prepared to recognize that Jerusalem is the capital of Israel and that's where the American embassy should be, then you're operating on a completely different wavelength".
But Netanyahu insisted the embassy move is "the right thing to do" and ordered other countries to follow suit. Forty protesters have been killed and more than 1,700 wounded by Israeli troops since late March.
The Israeli army said on Sunday that it held Hamas accountable for anything in the Gaza Strip "and its consequences".
"We are anticipating a lovely, inspirational, moving event", Friedman said in a video published Friday offering the first glimpse of the the newly relocated embassy.
A high-ranking delegation of Gaza's Hamas rulers is heading to Egypt a day ahead of a planned massive rally at the Israel-Gaza border.