A 1995 law mandates the relocation of the embassy, but provides the president with the prerogative to postpone the move on national security grounds.
"Trump signed the waiver under the Jerusalem Embassy Act and delayed moving the U.S. Embassy in Israel from Tel Aviv to Jerusalem, no one should consider this step to be in any way a retreat from the President's strong support for Israel and for the United States-Israel alliance", the White House said in a statement.
In a statement, White House press secretary Sean Spicer said that the president's decision doesn't mean he is backing off of his promise.
Another administration official said the decision to sign the waiver was not yet final and that paperwork both to move the embassy to Jerusalem and to keep it in Tel Aviv had been presented to the president.
"While President Donald J Trump signed the waiver under the Jerusalem Embassy Act and delayed moving the U.S. embassy in Israel from Tel Aviv to Jerusalem, no one should consider this step to be in any way a retreat from the president's strong support for Israel and for the United States-Israel alliance".
The Jewish state has long urged the US and others to build embassies in Jerusalem, to reflect Israel's claim to the holy city as its capital.
The waiver has been signed by every US president since 1995, and it is valid for six months at a time.
One Mideast analyst says President Donald Trump's decision not to immediately move the us embassy in Israel to Jerusalem represents a "very traditional approach to Arab-Israeli peacemaking". Barring a last-minute surprise, Trump is expected to renew the waiver.
"We are ready to start the consultation process with the USA administration", he said after Trump's announcement. According to that plan, Jerusalem - with its religious sites revered by Jews, Christians and Muslims - would not be part of either state and would be governed by an global body. The last waiver was signed by former President Barack Obama six months ago.
US President Donald Trump (R) shakes hands with King Abdullah II of Jordan in the Oval Office at the White House as First Lady Melania Trump and Queen Rania look on in Washington, DC, on April 5, 2017.
Signing the waiver this week forestalls any move for another six months.
A relocation of the USA embassy is "something the president supports, something he supported during the campaign, something he still supports", the official told CNN.
Today, Gilboa says, the average Israeli is more interested in the U.S. finally allowing Israelis to travel to the U.S. visa-free - so they won't have to go through arduous visa questioning at the U.S. Embassy, no matter which Israeli city it's located in. But after he took office in January, the issue lost momentum as he met Arab leaders who warned it would be hard to rejuvenate long-stalled peace efforts unless he acted as a fair mediator. Trump has said he's reviewing whether to fulfill his campaign promise to move it to Jerusalem.