According to senior administration officials, Trump will make the major announcement along with his policy from the White House tonight.
"The President would say that the US government recognises that Jerusalem is the capital of Israel. He views this as recognition of historic reality," a senior administration official told reporters.
"Jerusalem has been capital of Jewish people since ancient times and modern reality that it has been the seat of government, important ministries, its legislature, the Supreme court," the official said, speaking on condition of anonymity.
In his remarks, Trump will also direct the State Department to initiate the process of moving the US embassy from Tel Aviv to Jerusalem.
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Noting that finding appropriate land and construction of a new embassy would take at least a couple of years, officials said Trump would continue to give waiver as required by the Congress - for not moving its diplomatic mission to Jerusalem.
Trump's action enjoys broad bipartisan support in the Congress, the official said.
"Trump remains committed to achieving a lasting peace agreement between the Palestinians and Israel, and is optimistic that peace can be achieved," the official said, adding that not recognising Jerusalem as capital of Israel has done nothing to achieve peace for more than two decades.
Trump recognises that the specific boundaries of Israeli sovereignty are subject to final status negotiations, the official said.
Trump has decided to go ahead with his plan, ignoring dire warnings from Saudi Arabia's King Salman and Egyptian President Abdel Fattah al-Sisi, one of his closest allies in the Middle East.
Sisi warned that the move will complicate the situation and "jeopardise the chances of peace in the Middle East".
The international community considers east Jerusalem illegally occupied by Israel and most countries have their embassies in Tel Aviv.
Responding to questions, senior administration officials said the President believed that the move would have no impact on the peace process and the deal is within reach and can be achieved.
Earlier, Trump spoke over phone with a number of leaders in the Middle East to share his decision on Jerusalem, the White House said.
"This announcement does not change US policy over these specific borders," the senior administration official said, while another official asserted that the President is not taking a decision that affects any of the boundaries and sovereignty.
Trump's anticipated announcement received mixed message from lawmakers.
Senator Ted Cruz described this as a "historical" announcement.
"I strongly encourage and would unequivocally support President Trump formally recognising Jerusalem as Israel's capital and beginning the important process of moving our embassy from Tel Aviv to Jerusalem," he said.
"There's a reason why all past US administrations have avoided making this move, and why leaders from all over the world, including a group of former Israeli ambassadors, have warned Trump against doing it. It would dramatically undermine the prospects for an Israeli-Palestinian peace agreement, and severely, perhaps irreparably, damage the US' ability to broker that peace," Sanders said.
"What the US should be doing now is bringing adversaries in the Middle East together to seek common solutions, not exacerbating tensions in this highly volatile region," he said.