"If the Americans or anybody else move the embassy, it is a fait accompli, a recognition of the annexation of East Jerusalem. Period," chief Palestinian negotiator Saeb Erakat said during a visit to Paris.
"For us Palestinians, it's meaningless to have a Palestinian state without East-Jerusalem as a capital.
"If we wake up one morning, turn on Fox News or CNN and find that somebody signed the decision to move the embassy, the same day the PLO recognition of Israel will be revoked," he warned.
The status of Jerusalem is one of the thorniest issues in the seven-decade conflict between Israel and the Palestinians.
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The Palestinians regard Israeli-annexed east Jerusalem as the capital of their future state, while Israel proclaims the entire city as its capital.
Palestinian president Mahmud Abbas last month warned US President Donald Trump, before his inauguration, against implementing a campaign pledge to move the embassy from Tel Aviv to Jerusalem.
Abbas warned such a move would "destroy the prospects of any political process, bury the hopes for a two-state solution, and fuel extremism in our region, as well as worldwide."
Erakat said that if the embassy were moved, the Palestinians would "ask the Israeli occupation power to resume its responsibility."
"They don't need to send us money because it's the responsibility of the occupying power to pay the salaries. Then we will go to the UN to tell them that this country is not abiding by resolutions, by any international law and we want to suspend its membership until it behaves."