The leaders of 57 Muslim nations have called on the world to recognise "the State of Palestine and East Jerusalem as its occupied capital".
An Organisation of Islamic Co-operation communique declares US President Donald Trump's decision to recognise the city as Israel's capital as "null and void".
It also says the move has signalled Washington's withdrawal from its role in the Middle East peace process.
Palestinian President Mahmoud Abbas earlier said the UN should take over.
In a speech to the OIC summit in Istanbul, Mr Abbas said it would be "unacceptable" for the US to be the mediator "since it is biased in favour of Israel".
The Palestinians had engaged with the Trump administration in an attempt to agree "the deal of the century", he noted, but had instead "got the slap of the century".
Jerusalem is home to key religious sites sacred to Judaism, Islam and Christianity, especially in East Jerusalem.
Israel occupied the sector, previously occupied by Jordan, in the 1967 Middle East war and regards the entire city as its indivisible capital.
The Palestinians claim East Jerusalem as the capital of a future state, and its final status is meant to be discussed in the latter stages of peace talks.
Israeli sovereignty over Jerusalem has never been recognised internationally, and all countries currently maintain their embassies in Tel Aviv. However, President Trump has announced that the US will eventually move its embassy, reports BBC.