"The diplomatic blockade has been broken and will be broken", he said at the official event at Ammunition Hill marking Jerusalem Day.
Meanwhile, Israel said it had bolster its forces on the border with the Gaza Strip ahead of mass protests expected to draw tens of thousands of people.
"It is time to officially recognize Jerusalem as the capital of Israel", Trump declared on December 6, saying that he hoped the move could spur renewed peace negotiations. "We hope we can achieve a successful outcome there as well", said Pompeo whose first two weeks in office have been largely consumed with arranging a summit between Trump and North Korean leader Kim Jong Un.
Workers prepare the stage for the opening ceremony of the new US embassy in Jerusalem on May 13, 2018.
Speaking during a reception of a U.S. diplomatic delegation in Jerusalem, Netanyahu thanked the United States for the relocation, which will take place on Monday.
"Our people will be eternally grateful for his decision to recognize Jerusalem as Israel's capital".
"People have been waiting for 70 years for this to happen. It will remain our capital for all time".
The few foreign embassies built in West Jerusalem moved to the less controversial beachfront city of Tel Aviv.
The US Embassy move "gives life to a religious conflict instead of a dignified peace", it said in a statement. You base peace on the foundations of truth.
The Palestinians want East Jerusalem as the capital of their future state.
The White House is reportedly working on an Israel-Palestine peace deal, but details of the agreement remain unknown. "Of course we will all celebrate this day, a real celebration, tomorrow", he said at a weekly Cabinet meeting. "There's a special bond between our families".
An official in Israel's Ministry of Foreign Affairs told Breitbart News at a reception Sunday evening that the mood in his department was "somewhere between ecstatic and euphoric". About 40 of them accepted the invitation.
Netanyahu also thanked the governments of Guatemala and Paraguay for choosing to move their embassies to Jerusalem, and added that others will follow as well, but "we won't say who because that's a state secret".
Trump will not attend Monday's embassy ceremony, but he is expected to address the planned audience of 800 remotely by video.
Kushner and Ivanka Trump sat in the front row near Netanyahu during the ceremony but did not speak.
"In the long run, we're convinced that this decision creates an opportunity and a platform to proceed with a peace process on the basis of realities rather than fantasies, and we're fairly optimistic that this decision will ultimately create greater stability rather than less", Friedman said.
The prime minister presented Friedman with a framed version of Trump's presidential order announcing the recognition Jerusalem as Israel's capital.
In 1947, the United Nations approved a plan to split up British Mandate Palestine into a Jewish state and an Arab state. Four European countries - Austria, the Czech Republic, Romania, and Hungary - have confirmed their participation although the European Union opposes the relocation.