The move is timed to coincide with the 70th anniversary of the State of Israel's founding.
The premier was also suffering from a "cough", the office said in a statement.
The planning permit waiver for the embassy will last for three years, the ministry statement said.
President Donald Trump won't attend the opening of the United States Embassy in Jerusalem on May 14, Israeli television station Hadashotreported on Tuesday, however may make a visit to symbolically open the new mission in July.
Israeli Prime Minister Benjamin Netanyahu was rushed to the hospital Tuesday afternoon with a high fever, according to a spokesman.
The interim embassy will be based in the Jerusalem neighbourhood of Arnona and will contain office space for the ambassador and a small staff, said the USA embassy in Tel Aviv.
The new embassy initially will be housed in southern Jerusalem, in the Arnona neighborhood, on a compound that now houses the consular operations of the Consulate General of Jerusalem.
Until now, the USA embassy has been located in Tel Aviv with a separate consulate general located in Jerusalem that represents U.S. interests in the Palestinian territories.
"I call on all sides to exercise restraint and to take the necessary steps to avoid violent escalation", he said.
The status of Jerusalem is among the most contentious in the Israeli-Palestinian conflict.
And last week the Palestinian president Mahmoud Abbas called the USA ambassador to Israel a "son of a dog" in an angry rant against the Trump administration, signalling new trouble ahead for an expected U.S. peace proposal.
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