The Guatemalan embassy will be located in Jerusalem Technology Park in the city's the Malha neighborhood.
Marking the move, the Jerusalem municipality illuminated the walls of the Old City walls late Tuesday with flags of Guatemala, Israel and the United States and a message thanking Morales.
Guatemala opened an embassy in Jerusalem on Wednesday, two days after the United States inaugurated its new site in the contested city in a move that infuriated Palestinians and drew global condemnation.
Guatemalan President Jimmy Morales will meet Israeli Prime Minister Benjamin Netanyahu in Jerusalem on Wednesday, and he hopes to profit from the his loyal support. Israel's passage in June 1980 of a law proclaiming Jerusalem its "indivisible and eternal capital" led to a U.N. Security Council resolution calling on Guatemala and several other countries to move their embassies to Tel Aviv. "We remember our friends and Guatemala is our friend, then and now", Netanyahu said.
"But today, I just want to say how delighted we are to have you".
Israel has faced worldwide criticism over its use of live fire against demonstrators.
Israel has faced global criticism over its use of live fire, but says its actions are necessary to defend the border and stop mass infiltrations from the Palestinian enclave, which is run by Islamist movement Hamas.
The heavy Palestinian death toll, along with hundreds of wounded, made it by far the bloodiest day of cross-border violence since a devastating 2014 war between Israel and Hamas.
Israel's army said "it appears that at least 24" of those killed were militants, mainly from Hamas and Islamic Jihad.
The move is also seen by some as a gesture to elicit United States support at a time when Morales stands accused by Guatemalan prosecutors of accepting illegal campaign contributions.
Israeli troops shot dead dozens of Palestinian protesters on the Gaza border on Monday when the high-profile opening of the U.S. Embassy to Israel in Jerusalem by the administration of President Donald Trump raised tension to boiling point after weeks of anti-Israeli demonstrations.
Israel captured east Jerusalem in the 1967 Mideast war and annexed it in a move not recognized internationally.
Israel occupied the West Bank and east Jerusalem in 1967 and later annexed east Jerusalem in a move never recognized by the global community.
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