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"It's a question of when, not if", a U.S. official said at the time about a move to Jerusalem, which Israel considers its eternal capital.

"President Donald Trump is actively considering when and how to move the American embassy in Israel from Tel Aviv to Jerusalem", Pence said at an event marking the 70th anniversary of United Nations Resolution 181, which endorsed the establishment of a Jewish state in what was then British Mandatory Palestine.

"President Donald Trump is actively considering when and how to move the American embassy in Israel from Tel Aviv to Jerusalem", Pence told the gathering of United Nations ambassadors, diplomats and Jewish leaders.

It would also overturn decades of global consensus on Jerusalem, a highly-contested city, half of which was occupied and annexed by Israel following the 1967 War.

Shifting the building could be seen as a de facto recognition of Israel's claim over the whole city, including predominantly Palestinian east Jerusalem.

Trump pledged repeatedly during his campaign to move the United States embassy from Tel Aviv to Jerusalem.

Trump campaigned on a promise to move the embassy, but has walked back from the pledge as president.

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Next month, Trump is due to sign another waiver postponing a transfer for another six months.

Trump on June 1 signed a waiver to keep the USA embassy in Tel Aviv, avoiding a move to Jerusalem for an additional six months. It later annexed east Jerusalem in a move never recognised by the global community.

"Right now we are actually working on a plan that everybody says will never work, because for many, many years it never worked - they say it's the toughest deal of all, peace between Israel and the Palestinians", Trump said.

Khalil Shaheen, a Ramallah-based analyst, described Pence's remarks as part of a "blackmail campaign", arguing that the U.S. is using the embassy as a tool to pressure the Palestinians.

If as a forerunner to moving the embassy, Trump formally recognizes Jerusalem as Israel's capital, he is likely to make clear that the recognition is only of west Jerusalem in order to keep the final status of the entire city something to be determined in negotiations.

"This will destroy any potential of establishing an independent Palestinian state through USA negotiations - which is very risky", he added.

The report, to which there was no immediate confirmation, followed a speech US Vice President Mike Pence gave a day earlier in which he said that Trump was "actively considering" the step. Most countries have their embassies located in Tel Aviv.