The US President Donald Trump decided on 1 June to leave the US Embassy to Israel in Tel Aviv and not move it to Jerusalem, going back on a campaign promise.
Trump signed a waiver that postpones the embassy's relocation for six months, Efe reported.
"No one should consider this step to be in any way a retreat from the President's strong support for Israel and for the US-Israel alliance," the White House said in a statement.
"As he (Trump) has repeatedly stated his intention to move the embassy, the question is not if that move happens, but only when."
"President Trump made this decision to maximise the chances of successfully negotiating a deal between Israel and the Palestinians, fulfilling his solemn obligation to defend US' national security interests," the White House added.
However, Israeli Prime Minister's Office said in a statement that it's "disappointed" with Trump's decision to postpone the moving of the US embassy in Tel Aviv to Jerusalem.
The statement further accused Trump's decision of breaking his campaign promise and driving peace away.
A law passed by Congress in 1995 mandates the embassy's relocation to Jerusalem but includes language allowing the president to waive its enforcement for six months "on grounds of national interests."
Presidents Bill Clinton, George W. Bush and Barack Obama all signed the waivers.
During the 2016 presidential campaign, Trump vowed he would expedite the move.
During his first official visit to Israel and the Palestinian territories last month, Trump said there was "an exceptional opportunity" to achieve peace between Israelis and Palestinians.
The president also made a commitment to Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas to support a return to the negotiating table.
The US government does not recognise Jerusalem as the capital of the Jewish state, as many other nations do, and despite the fact that the Israeli parliament, or Knesset, declared a unified Jerusalem as "eternal capital, indivisible from Israel."
East Jerusalem, which Palestinians consider the capital of their hoped-for independent state, was occupied by Israel in the 1967 war and annexed in the 1980s.