The German government "does not support this position because the status of Jerusalem can only be negotiated within the framework of a two-state solution," spokesman Steffen Seibert wrote on Twitter.
German foreign minister Sigmar Gabriel, for his part, said he feared Trump's decision would lead to a "new escalation in the conflict between Israel and the Palestinians".
The decision will likely throw "fuel on the fire", he told public broadcaster ARD.
"We hope that (our) worries can be... calmed. But this about face is already a big problem."