The change, quickly condemned by the Palestinians, follows a series of setbacks for them at the hands of President Donald Trump, who has turned US policy sharply towards Israel.

Pro-Israel advocates hailed the decision, saying it confirmed the US recognised the whole of Jerusalem as part of Israel.

“This decision is driven by our global efforts to improve the efficiency and effectiveness of our operations. It does not signal a change of US policy,” Pompeo said in a statement.

He said the United States “continues to take no position” on how any peace deal between the Israelis and Palestinians would take shape.

The Palestinian leadership rejected Pompeo’s “efficiency” explanation.

The decision has “a lot to do with pleasing an ideological US team that is willing to disband the foundations of American foreign policy, and of the international system, to reward Israeli violations and crimes,” the Palestinians’ chief negotiator Saeb Erekat said.

“The Trump administration is part of the problem, not part of the solution,” he added.

International powers have for decades maintained separate and autonomous representations to Israel and the Palestinians on the basis of supporting the eventual creation of an independent Palestinian state.

They have insisted that the status of Jerusalem, which both the Israelis and Palestinians see as their capital, should be negotiated between the parties as part of any end deal.

Last December, Trump reversed long-standing US policy and recognised Jerusalem as the capital of Israel, prompting Palestinian president Mahmoud Abbas to boycott his administration.

The embassy was officially transferred on May 14.

Since then, the Trump administration has forced the Palestinians to close their Washington mission and has slashed hundreds of millions of dollars in aid, in a bid to force them to the negotiating table.

Trump’s son-in-law Jared Kushner, alongside Friedman and peace envoy Jason Greenblatt, has been working for months on a still-secret peace proposal, which Palestinians fear will be too one-sided toward Israel.

The move Thursday nearly closes off all direct diplomatic contacts between the United States and the Palestinians, analysts said.

Ofer Zalzberg of the International Crisis Group think-tank said the US would be the only major power without a separate, independent representative office for the Palestinians.

“Other countries have gone to great lengths to avoid having the same representatives to Israel and the Palestinian Authority,” he told AFP.

Robert Danin, a former senior US government official dealing with Israeli-Palestinian issues, said the move was a victory for “hard right partisans” who have sought to eliminate the Palestinian-focused consulate general “for decades.”

The consulate general “is THE eyes and ears into Palestinian politics and society. Its independence from US Embassy Israel provided Washington w/solid, unvarnished reporting and analysis,” he said on Twitter.

But Eugene Kontorovich, a law professor with the Jerusalem-based Kohelet Policy Forum and advocate for the embassy move, said the decision was more evidence the US considered Jerusalem to be fully part of Israel.

“This step confirms that the US recognises the entire city as Israel’s capital,” he said.

State Department spokeswoman Heather Nauert defended the move, saying the new Palestinian Affairs Unit inside the embassy would maintain contacts with Palestinians in the West Bank, Gaza Strip and Jerusalem at the same level as before the change.

“We value our relationship with the Palestinian people. We look forward to continued partnership and dialogue with them and, we hope in future, with the Palestinian leadership,” she said via Twitter.