Guatemala's announcement on Sunday came after two-thirds of United Nations member states approved a motion rejecting US President Donald Trump's controversial decision to recognise Jerusalem as Israel's capital.
Minister Katz also chose to name it the Donald J. Trump station, after the American president who recognized Jerusalem as the capital of Israel, Yedioth Ahronoth reported.
The high-speed Tel Aviv-Jerusalem railway has been under construction since 2001 and will complement the existing, slower railway that already operates between the two cities.
In May, President Trump also became the first sitting USA president to visit the Western Wall when he traveled to Israel, one of a reported 11 million tourists to do so each year. The Western Wall is the holiest site where Jews can pray.
Foreign Minister Sandra Jovel said the change amounts to "a foreign policy decision, therefore sovereign", and that Guatemala has no intention of changing their mind.
Congress passed a law in 1995 that ordered the US embassy to be located in Jerusalem, but every USA president since the mandate became law made a decision to delay it, arguing that a relocation must come through negotiations, not a decree.More news: First State unemployment drop in November may be misleading
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The proposed stop would be near the Western Wall in Jerusalem's Old City, right in the middle of East Jerusalem, which the Palestinians envisage as their future capital.
The Department of Foreign Affairs on Wednesday dismissed media reports that the country is in talks with Israel to move its embassy to Jerusalem.
The move to name the station after Trump comes just weeks after the president shocked the worldwide community and recognized Jerusalem as the capital of Israel in a move that was widely praised by Israelis.
The tunnel would have two stations about 70ft below ground, "City Centre" and "Donald Trump, Western Wall", near an ancient expressway in the Old City's Jewish Quarter called the Cardo. The train will extend from Tel Aviv to Jerusalem.
The Israeli minister noted that the decision taken by Donald Trump would trigger a wave of such moves.