The move, later confirmed by State Department spokesperson Heather Nauert, comes much earlier than anticipated, after several top officials, including President Trump, said it would not happen until at least the end of 2019.
To make the move quickly, the new embassy will be at the existing U.S. consular building that provides visa services for American citizens in the Arnona neighborhood. The U.S. ambassador and a small number of staff will begin working there this spring, with plans for a new embassy facility to open on the compound by the end of next year, according to Nauert.
One Israeli minister suggested the administration could potentially cut the ribbon and open the embassy on May 14 — Israel's independence day and its 70th anniversary — although in Israel, it will be celebrated on April 19 in the Hebrew calendar.
Ambassador David Friedman, President Trump's former lawyer and campaign adviser, will bring a smaller staff to Arona in May, but there is no specific date yet for the opening, according to the two officials. Nauert said only that, "The opening will coincide with Israel’s 70th anniversary."
In addition to this new interim embassy, the administration has started the search for a permanent embassy site, Nauert said, calling it a "longer-term undertaking." It will take years to purchase land, get proper zoning and permits, and then build the facility.
The Trump administration had previously said any move would be next year: "We anticipate having a small version of it open sometime next year," Trump said while meeting with Israeli Prime Minister Benjamin Netanyahu in Davos, Switzerland, in January.
In particular, Secretary Tillerson, who is the one to sign off on any embassy renovation or move, had concerns about security that would delay the decision.
State Department officials would have to "go over there, they take a look at the buildings, they take a look at the set-backs — the requirements for how far we have to be back from the street — look at different angles, and they make all those assessments. That's not something that can be done overnight, but we're engaged in that process now," a senior State Department official told ABC News on January 25.
Tillerson himself said the embassy move was "probably no earlier than three years out" in December.
But the accelerated timeline is a win for Friedman and Jared Kushner, Trump's son-in-law and senior adviser, who had pushed for the embassy move before the 2018 Congressional elections, according to an administration source.
But there were some reports that casino magnate and Republican donor Sheldon Adelson had offered to help pay for the new embassy. A State Department official dismissed the report, saying there are no formal discussions or proposals.
The existing U.S. consulate general in Jerusalem, a historic building dating back to 1912, will continue its mission and remain open independent of the future embassy.
ABC News' Jordana Miller contributed to this report.