Paraguay opened its embassy in Jerusalem on Monday, becoming the third country – after the United States and Guatemala – to make the politically sensitive move from Tel Aviv.
"A great day for Israel," Prime Minister Benjamin Netanyahu told Paraguayan President Horacio Cartes during the inauguration ceremony.
"A great day for Paraguay. A great day for our friendship. You have not only the support of our government but the profound gratitude of the people of Israel."
The U.S. relocated its embassy to Jerusalem a week ago, drawing the ire of Palestinians. It was followed by Guatemala on Wednesday.
The status of Jerusalem is considered one of the thorniest obstacles to forging a peace deal between Israel and the Palestinians, who want east Jerusalem as their capital. Israel captured the territory, along with the West Bank, from Jordan in the 1967 Six-Day War and reunified the city. In 1980, Israel annexed the eastern sector.
"This is a historic day that strengthens ties between Paraguay and Israel," Cartes said at the ceremony.
Hanan Ashrawi, an official of the Palestine Liberation Organization, denounced Paraguay's move.
"By adopting such a provocative and irresponsible measure that is in direct contravention of international law and consensus, Paraguay has conspired with Israel, the United States and Guatemala to entrench the military occupation and to seal the fate of occupied Jerusalem," Ashrawi said in a statement.
In December, U.S. President Donald Trump recognized Jerusalem as Israel's capital, reversing decades of U.S. policy and upsetting the Arab world and Western allies.
Cartes' decision to move the Paraguayan Embassy to Jerusalem has been controversial in his home country, as it comes less than two months before he is replaced by Mario Abdo Benitez. The president-elect has said he was not consulted on the move.