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Israel has pushed for more countries to move their embassies to Jerusalem, despite general consensus against this.
Israeli Foreign Minister Eli Cohen on Wednesday said Paraguay will transfer its embassy to Jerusalem in 2023.
The US president said the move made Evangelicals 'more excited' than Jewish people.
Israel's prime minister is set to discuss the possibility of the US President Donald Trump opening the new US embassy in Jerusalem.
The Arab world is reacting in anger after Trump's shocking decision to move the US embassy in Israel to Jerusalem, a break from previous US policy
The new US embassy opened in the contested city on 14 May as Israeli soldiers killed at least 60 Palestinians who protested near the Gaza border.
Guatemala moved its embassy to Jerusalem earlier this month, following the inauguration of the US Embassy in disputed Jerusalem.
Despite the international outrage over Israel's murder of scores of Palestinians, Paraguay has followed the US in opening an embassy in Jerusalem.
The Palestinian foreign ministry has recalled its ambassadors from four European countries that had ignored EU protocol and celebrated the US embassy move in Jerusalem.
At least 61 Palestinians died on Monday after Israeli forces fired at demonstrators protesting the new US embassy in Jerusalem.