Palestinian President Mahmoud Abbas' adviser Mahmoud Habash said on Saturday if President Donald Trump were to do so it would amount to a "complete destruction of the peace process."
Speaking in Abbas' presence, whose presidency expired in 2009, Habash said "the world will pay the price" for any change in Jerusalem's status.
Officials in Washington say Trump is considering recognising Jerusalem as Israel's capital as a way to offset his likely decision to delay his campaign promise of moving the US embassy there.
Israel regards Jerusalem as its capital, a position nearly the entire world rejects saying its status should be determined in peace talks with the Palestinians. The government in Ramallah claim the eastern part of the city as their future capital.
Trrump senior adviser and son-in-law Jared Kushner has been holding talks with Saudi Arabia's powerful Crown Prince Mohammed bin Salman on a US-backed Palestinian state, media reports stated this week.
Trump has promised to make it a foreign policy priority to forge a peace deal between Israel and Palestine, and has tasked his son-in-law with the task.
Kushner and Mohammed bin Salman have been in negotiations on establishing a Saudi-funded Palestinian state, Bloomberg said, although the secret talks have angered State Department head Rex Tillerson.
Trump's son-in-law and the Saudi crown prince have struck a close relationship, although Tillerson is said to be furious about being kept "in the dark" on the Palestine issue, the report said.