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The Palestinian leadership is urging the international community to boycott the newly created US Embassy unit that will handle relations with Palestinians.

Palestinian official Saeb Erekat issued a statement on Thursday calling upon the diplomatic community "not to engage in any kind of formal relationship or collaboration" with the new Palestinian affairs unit, which will take over the responsibilities of the shuttered US consulate.

The US move to close the consulate earlier this week was the latest decision from the Trump administration to infuriate the Palestinians, who view the closure as a "downgrade" and "new assault" on the prospect of a US-brokered solution to the conflict.

The unit will grant ambassador David Friedman, a staunch supporter of the Israeli West Bank settler movement, authority over US relations with the Palestinians.

Palestine and the international community reacted furiously to Trump's decision in December 2017 to recognise Jerusalem as Israel's capital, breaking with the international consensus that the status of the city would be decided in negotiations.

President Mahmoud Abbas has broken off ties with the Trump administration and has vowed to oppose any US peace proposal that he has warned would be biased in favour of Israel.

The United States has also cut hundreds of millions of dollars in aid for the Palestinians including funds to the UN Palestinian refugee agency (UNRWA), which was forced to scale back its education and health programs.

Israel has launched a new settlement push in the occupied West Bank since US President Donald Trump took office, laying the groundwork for what could be the largest construction binge in years.

The international community consider Israeli settlements to be illegal and obstacles to peace. Over 400,000 Israelis now live in the West Bank, in addition to 200,000 in east Jerusalem.

Agencies contributed to this report.

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