Canberra, The Australian government on Tuesday announced that it has reversed a 2018 decision to recognise West Jerusalem as the Israeli capital.

A statement citing Foreign Minister Penny Wong said: "The government has reaffirmed Australia's previous and longstanding position that Jerusalem is a final status issue that should be resolved as part of any peace negotiations between Israel and the Palestinian people.

"This reverses the (former Prime Minister Scott) Morrison government's recognition of West Jerusalem as the capital of Israel. Australia's embassy has always been, and remains, in Tel Aviv.

"Australia is committed to a two-state solution in which Israel and a future Palestinian state coexist, in peace and security, within internationally recognised borders. We will not support an approach that undermines this prospect."

The statement went on to say that the incumbent Anthony Albanese-led government "recommits Australia to international efforts in the responsible pursuit of progress towards a just and enduring two-state solution.

"Australia will always be a steadfast friend of Israel. We were among the first countries to formally recognise Israel under Labor Prime Minister Ben Chifley. This government will not waver in its support of Israel and the Jewish community in Australia."

The Foreign Minister was also quoted as saying that "we are equally unwavering supporters of the Palestinian people, providing humanitarian support every year since 1951 and advocating for resumed peace negotiations".

Israel regards Jerusalem as its "eternal and undivided" capital, while the Palestinians claim East Jerusalem, occupied by Israel in the 1967 Middle East war, as the capital of a future state.

Israeli sovereignty over Jerusalem has never been recognised internationally, and according to the 1993 Israel-Palestinian peace accords, the final status of Jerusalem is meant to be discussed in the latter stages of peace talks.