In the evening, Netanyahu released a statement, charging that the move "won't harm the peace process".
In response, a statement from the Prime Minister's office read: "Israel's position has been stated many times to the American administration and to the world".
Israel's Channel 2 reported that during a planning meeting between United States and Israeli officials, the Israelis were told that Trump's visit to the Western Wall, in annexed East Jerusalem, was private.
Top officials at the State Department, Department of Defense and the USA intelligence community are urging the White House not to recognize Jerusalem as Israel's capital, warning that such a decision would be harmful to the peace process and carry broader regional risks, a senior administration official and several U.S. officials told CNN. "It will advance the process because of the correction of the historic injustice and the smashing of the Palestinian fantasy of Jerusalem not being the capital of Israel", it said.
Trump promised to relocate the US embassy as one of his campaign pledges.
Israel wants the White House to explain why a U.S. diplomat preparing President Donald Trump's visit to Jerusalem said Judaism's holy Western Wall in its old city is part of the Israeli-occupied West Bank, an Israeli official said on Monday.
Two of the Israeli leader's leading political rivals, far-right education minister Naftali Bennett and centre-right opposition politician Yair Lapid, both insisted this week that the embassy should be moved to Jerusalem.
Since taking office in January, Trump has shown signs of shelving his campaign pledge to move the embassy from Tel Aviv, while vowing to do what is necessary to clinch a Middle East peace agreement.
After the report the Prime Minister's Office took the unusual step of releasing minutes from the Netanyahu-Trump meeting to prove that the Prime Minister supports the USA embassy move.
A Fox News reporter cited sources saying Netanyahu had asked Trump not to move the embassy now, leading the prime minister to issue an angry rebuttal.
Tillerson added that the decision "will be informed by the parties involved in the talks".
Although the battle against terrorist groups and what Tillerson called "Iran's destabilizing activities in the region" are expected to be the main focus, given the invitation list Trump will likely also hear strong-held views on the Israeli-Palestinian issue, and Jerusalem in particular.
The site has been politically controversial, as it is located in Jerusalem's Old City, which was under Jordanian control from the founding of Israel in 1948 to 1967, when it came under Israeli control following the Six-Day War.