The transfer will be carried out by upgrading the current US Consulate General in Jerusalem to embassy status.
The ambassador said staff at the Tel Aviv mission had just marked its last day as an embassy and some of them will turn up for work tomorrow at the Jerusalem embassy, which will host an opening ceremony later that day.
President Donald Trump's national security adviser believes that relocating the U.S. Embassy to Jerusalem will "make it easier" to arrive at an Israeli-Palestinian peace agreement.
Netanyahu on Sunday praised Trump's "bold decision" in upending decades of US policy by relocating the embassy from Tel Aviv and recognizing Jerusalem as Israel's capital.
The fate of Jerusalem is a deeply emotional issue at the heart of the Israel-Palestinian conflict.
On Sunday, Hamas leader Ismail Haniya travelled to Cairo for talks amid speculation over whether Egypt is attempting to calm the situation.
Another large-scale protest is planned for Tuesday, when Palestinians mark their "nakba", or catastrophe, referring to their mass uprooting during the Mideast war over Israel's 1948 creation.
Israel considers the entire city its capital, while the Palestinians see east Jerusalem as the capital of their future state.
Both the embassy move and the protests have symbolic timing. Most of the world maintains embassies in Tel Aviv, saying the Jerusalem issue must first be resolved.
Tel Aviv is the customary base for foreign embassies in Israel, with the United States and other countries having avoided Jerusalem because of its contested status.
Israel's army said it would nearly double the number of troops surrounding the Gaza Strip and in the occupied West Bank.
Israel captured east Jerusalem in the 1967 Mideast war and annexed it in a move not recognized internationally.
"At this time 70 years ago, the new state of Israel was forcibly expelling hundreds of thousands of Palestinians from their homes in what is now Israel".
"We will place a million martyrs on this land until, God willing, we liberate it", Mahmoud al-Zahar, a co-founder of Hamas, vowed this weekend.