The city of Jerusalem was meant to be subject to the United Nations direct administration of the "corpus separatum" regime according to the Resolution 181 (II). Due to the events of the first Arab-Israeli war, Jerusalem was de facto divided between the newly-created State of Israel and Jordan.
After the events of the Six-Day War, the State of Israel occupied East Jerusalem and thus expanded its influence on the city as a whole. The Palestinian State, with its capital, East Jerusalem, was admitted to the UN as a non-member state with observer status.
Alongside with the embassies relocation plan, Jerusalem might be recognized as the capital of Israel.