The Arab League's secretary general said U.S. President Donald Trump's decision raises questions about America's ability to support peace in the Middle East.
Israeli warplanes bombed two targets in Gaza late on Friday after rockets were launched at its territory by Hamas.
Israel maintains that all of Jerusalem is its capital. Palestinians want East Jerusalem as the capital of a future independent state. Israel, he said during an address to the Turkish Exporters' Assembly, "is an occupying state and their police are shooting youths and children".
He also reiterated Palestinians' stance which is a "complete rejection of the American recognition of Jerusalem as the capital city of Israel". Many in the global community have been protesting since Friday in reaction to the decision.
Erdogan has sought to position himself in the centre of diplomatic efforts to force Trump to reverse his decision and has held talks with French President Emmanuel Macron to that effect.
A possible meeting with Pence has also been turned down by Egypt's Coptic Church, MENA state news agency reported.
The State Department that protests could break out in the region following the change in policy.
Two Palestinians have been killed by Israeli forces during clashes over the weekend after Trump's announcement that infuriated the Palestinians and Muslims across the world.
An Israeli Army commander has been suspended after being filmed stealing apples from a Palestinian vendor's stand in the West Bank town of Hebron. The Israeli military said one protester was arrested.
The rally in Indonesia's capital drew a crowd of at least 5,000 people, police said. Scores more were wounded there and in the West Bank.
Trump's move has sparked protests in Muslim and Arab countries for four days.
Protesters told CNN they condemned Trump's steps on Jerusalem's status, and said they were angry at the "impotence" of Arab leaders in the wake of the controversial decision.
Erdogan has called for an emergency meeting of the Organization of Islamic Cooperation (OIC) in Istanbul on Wednesday to discuss the Jerusalem issue.
A senior United Arab Emirates (UAE) official said on Saturday that Trump's move was a "gift to radicalism".