President Donald Trump has decided to delay moving the US embassy in Israel from Tel Aviv to Jerusalem, despite promising to do so during the election.
He renewed a waiver for a law requiring the relocation, as his predecessors have done every six months since 1995.
The White House said Mr Trump would fulfil his campaign pledge but wanted to maximise the chances of a peace deal between Israel and the Palestinians.
Palestinian leaders had warned the move would threaten a two-state solution.
Israel has occupied East Jerusalem since the 1967 Middle East war. It annexed the area in 1980 and sees it as its exclusive domain. Under international law the area is considered to be occupied territory.
Israel is determined that Jerusalem be its eternal, indivisible capital. But Palestinians want East Jerusalem to be the capital of a future state.
Successive US administrations since 1948 have maintained that the status of Jerusalem is to be decided by negotiations and that they would not engage in actions that might be perceived as prejudging the outcome of those negotiations.