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The consulate in Jerusalem has functioned essentially as an embassy to the Palestinians. It was separate from the operations of the U.S. Embassy, which stewarded relations with the Israelis from Tel Aviv until May, when President Trump moved it to Jerusalem to fulfill a campaign promise.

Secretary of State Mike Pompeo on Thursday said the consulate closure was aimed at efficiency and wasn’t a policy change. He said a newly created Palestinian Affairs unit will operate out of the old consulate building, conducting reporting, outreach and programming with Palestinians in the West Bank, Gaza and Jerusalem.

Michael Oren, Israel’s deputy minister for diplomacy and a former Israeli ambassador to the U.S., welcomed the move on Twitter, calling it a great day for Israel, Jerusalem and the U.S.

Senior Palestinian officials called it another blow to their aspirations for an independent state.

“The Trump administration is making clear that it is working together with the Israeli government to impose greater Israel rather than the two-state solution on the 1967 borders,” said Saeb Erekat, the Palestine Liberation Organization’s secretary-general. “The U.S. administration has fully endorsed the Israeli narrative, including on Jerusalem, refugees and settlements.”

Palestinian officials have cut off contact with the Trump administration since December, when Mr. Trump said he would move the U.S. Embassy to Jerusalem and recognize Jerusalem as Israel’s capital.

More recently, the Trump administration has also ceased funding the U.N. Palestinian refugee agency, closed the PLO office in Washington and permanently suspended bilateral assistance to the Palestinians.

Mr. Trump said recently that his administration would unveil its plan for peace between the Israelis and the Palestinians in the coming months. U.S. officials have said little about the effort, other than it will contain a political component and an economic component and that the Israelis and Palestinians will have to make compromises. Mr. Trump said in September for the first time that he preferred a plan with two states.

Control of Jerusalem is among the most sensitive issues facing peace talks. Mr. Oren said closing the Palestinian-focused consulate “ends the last vestige of American support for” a divided city with an Israeli capital in West Jerusalem and a Palestinian capital in East Jerusalem.

Mr. Pompeo said the U.S. takes no position on final status issues, including boundaries and borders in Jerusalem. He said those matters will be resolved in negotiations between the Israelis and Palestinians.

Aaron David Miller, a former Middle East peace negotiator who has advised Republican and Democratic secretaries of state, said the technical move has important symbolic significance given other steps the Trump administration has taken.

“Merging the Jerusalem Consulate General with Embassy Jerusalem is not some harmless bureaucratic move for the sake of efficiency,” said Mr. Miller, who is now at the Wilson Center,a Washington think tank. “It’s another step in changing U.S. policy; downgrading the Palestinians and sending the message: ‘You lost; get over it.’ ”

U.S. Ambassador to Israel David Friedman will guide the merger, Mr. Pompeo said. The current consul general, Karen Sasahara, who arrived over the summer, will be reassigned to a new position in the next several months as her position will be eliminated, U.S. officials said.