European Union leaders today rejected US President Donald Trump's recognition of Jerusalem as the Israeli capital, saying they stuck by their view that the city's status should be settled by negotiation.

Trump's administration invited widespread criticism earlier this month when it officially recognised Jerusalem as the Israeli capital, effectively ignoring Palestinian claims on the city.

"EU leaders reiterate firm commitment to the two-state solution and, in this context, the EU position on Jerusalem remains unchanged," EU President Donald Tusk tweeted after the leaders of the bloc's 28 countries discussed the matter at a summit in Brussels.

The EU has voiced alarm at the US decision, with foreign policy head Federica Mogherini warning last week that it could take the situation "backwards to even darker times".

But today's statement by the bloc's heads of state and government adds fresh weight to the criticism of Trump's move, which upended seven decades of US policy on Jerusalem and triggered protests across the Islamic world.

The EU has long maintained that the only way to peace is two states -- Israel and Palestine -- with Jerusalem as the capital of both and the borders returned to their status before the 1967 Arab-Israeli War.

Israeli Prime Minister Benjamin Netanyahu earned a stern rebuff from Mogherini in Brussels on Monday when he suggested Europe would follow Washington's lead on Jerusalem.