Such a decision, which U.S. officials have said has not been finalized, would violate decades of U.S. policy not to take a stance on the fate of Jerusalem on the grounds that this was an issue Israelis and Palestinians should negotiate and decide.
If Trump made such a move, it could spark demonstrations or violence by Palestinians or by Muslims around the world, in part because of the sensitivity of the Jerusalem site known to Jews as the Temple Mount and to Muslims as Haram al-Sharif.
The site includes the al Aqsa Mosque, the third-holiest site in Islam, and the golden Dome of the Rock. It was also the site of an ancient Jewish temple, the holiest place in Judaism.
Israel seized East Jerusalem, which includes the area, during a 1967 war. However, the Waqf, a Muslim religious body, manages the Islamic sites within the compound.
A senior U.S. official told Reuters last week that Trump was likely to make the announcement on Jerusalem's being Israel's capital on Wednesday, though his adviser and son-in-law Jared Kushner on Sunday said no final decision had been made.
Kushner is leading Trump's efforts to restart long-stalled Israeli-Palestinian peace talks, efforts that so far have shown little progress.
The White House said it would not take any action on Monday on whether to move the U.S. embassy to Jerusalem from Tel Aviv, something that Trump had promised to do in his presidential campaign.
Trump is expected to sign the waiver, according to several U.S. officials. One U.S. official said Trump was likely to accompany the signing with an order for his aides to begin serious planning for an eventual embassy move, though it was unclear whether he would establish a strict timetable.