US Secretary of State Mike Pompeo announced on Thursday that Washington would merge the embassy and the consulate into one diplomatic mission in order to boost its efficiency.
Ali said the measure was taken as part of the continued "aggression and declared war" against the Palestinian people, according to the Egyptian MENA news agency.
READ MORE: Palestine Condemns US Decision to Merge Embassy, Consulate General in Jerusalem
Both Israel and Palestine see Jerusalem as their capital, and the status of the holy city has long been regarded as a matter that must be resolved through a Palestinian-Israeli peace process.
In May, the United States decided to relocate its embassy in Israel from Tel Aviv to Jerusalem, with the move provoking Palestinian outrage.