President Recep Tayyip Erdogan made the announcement yesterday just days after slamming Donald Trump at a summit of Muslim leaders.
Mr Trump sparked anger across the Muslim world and beyond with his controversial move to move the US embassy to Jerusalem, recognising it as Israel’s capital.
And now Turkey has responded with a similar plan for east Jerusalem in what looked like a direct response to the US.
Mr Erdogan told his AK Party: “God willing, the day is close when officially, with God’s permission, we will open our embassy there.”
Turkey could face difficulties seeing the plan through, however, as Israel controls all of Jerusalem and sees it as the nation’s capital.
But Palestinians want the capital of any future state to be in east Jerusalem.
Last week’s summit was held in a bid to challenge Mr Trump’s decision and saw leaders queuing up to denounce the US President.
In a statement issued afterwards, they claimed the decision meant Washington was withdrawing from its role “as sponsor of peace” in the Middle East.
In a speech, Mr Erdogan branded Israel a “terror state” and said the embassy move was a reward for “terror acts”.
He raged: “Israel is an occupying state. Israel is a terror state.”
Mr Erdogan went on: “I invite all countries supporting international law to recognise Jerusalem as the occupied capital of Palestine.”
And Palestinian President Mahmoud Abbas branded Mr Trump’s decision “the greatest crime”.
He declared: “Jerusalem is and always will be the capital of Palestine.”
The status of the city – home to holy sites for the Muslim, Jewish and Christian faiths – is one of the biggest obstacles to reaching a peace deal between Israel and the Palestinians.
The international community does not recognise Israeli sovereignty over the entire city, believing its status should be resolved in negotiations.
Mr Trump’s decision to relocate the embassy from Tel Aviv represented a shock reversal of decades of US policy.
But, announcing his move, Mr Trump said it was just a “recognition of reality and the right thing to do, something that has to be done”.