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The Arab League says it will no longer cooperate on any level with Guatemala because of the country's decision to move its embassy in Israel from Tel Aviv to Jerusalem.

The Cairo-based organization said on Wednesday it has abandoned a memorandum of understanding signed in 2013 and has severed relations with the Central American country.

Guatemala moved its embassy to Jerusalem earlier this month, following the inauguration of the US Embassy in disputed Jerusalem.

Guatemala was the first country to put its embassy in Jerusalem, in 1956. It moved the facility 24 years later to Tel Aviv, after the Israeli parliament declared Jerusalem its eternal and indivisible capital in contravention of a United Nations resolution.

East Jerusalem is recognised as occupied Palestinian territory under international law.

Global powers including the UK, France and Russia had previously slammed the US decision to move their embassy, while 128 nations backed a UN resolution rejecting the White House recognition of Jerusalem as Israel's capital.

Nine countries - including the US and Israel - voted against the resolution: Guatemala, Honduras, the Marshall Islands, Micronesia, Nauru, Palau and Togo.