Prime Minister Scott Morrison will acknowledge Palestinian claims to East Jerusalem in a strong statement this weekend on the need for a two-state solution in the Middle East.

Mr Morrison will announce the new Australian stance at the same time he recognises West Jerusalem as the capital of Israel, ending two months of painful debate over the contentious move.

In an important proviso, the Prime Minister will emphasise the status of West Jerusalem as the long-standing capital of Israel after heated speculation about whether the Australian recognition might apply to the entirety of the city.

The outcome is seen within the government as a practical resolution that supports the United Nations' objective of a two-state solution, soothing concerns among Muslim nations about any affront to the Palestinians.