The US has been accused of attempting to erase East Jerusalem's Palestinian residents after it referred to the embattled community as "non-Israeli citizens" in a new human rights report.

The State Department changed its standard description of East Jerusalem's Palestinians in its annual global human rights report on Wednesday, from "Palestinian residents" of the city to "Arab residents" or "non-Israeli citizens."

The change in terminology comes weeks after the release of President Donald Trump's controversial Middle East plan, which refers to Jerusalem as the "sovereign capital of the State of Israel."

'Palestinian Jerusalemites are Palestinians, and they've been living there for centuries. To eradicate their identity and history and culture and rename them at will, is not only preposterous, its unconscionable,' ​- Hanan Ashrawi, PLO

Israel illegally occupied East Jerusalem in the 1967 war in defiance of the international community, claiming it as a part of Israel.

The overwhelming majority of East Jerusalem's 340,000 Palestinians identify as Palestinians and have long sought the city's East as the capital of a future state.

Chief Palestinian negotiator Saeb Erekat slammed the change in wording, calling it an attempt to erase the identity and history of Palestinians from the land.

"The name change from Palestinian residents to Arab residents is a desperate attempt to erase the Palestinian people from Jerusalem," he wrote on Twitter.

"The American administration is adopting terminology, vocabulary and opinions of the occupying authority (Israel)."

'Preposterous, unconscionable'

Hanan Ashrawi, a senior official in the Palestinian Liberation Organisation, denounced the change in wording as "preposterous" and "unconscionable."

"Palestinian Jerusalemites are Palestinians, and they've been living there for centuries," Ashrawi said.

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"Just to decide this, to eradicate their identity and history and culture and rename them at will, is not only preposterous, its unconscionable."

For the last two years, State Department reports on human rights practices referred to East Jerusalem Palestinians as "Palestinian residents of Jerusalem" in sections on civil judicial procedures, discrimination and freedom of movement.

Those same sections in the 2020 report referred to them as "Arab residents" or "non-Israeli citizens".

Israel has warmly embraced Trump's Middle East plan, dubbed the "deal of the century", which grants Israel several of its key long-held wishes, including full sovereignty over the disputed city of Jerusalem and the right to annex all settlements in the occupied West Bank.

In exchange, Palestine would be granted a demilitarised state in the remaining disjointed parts of the West Bank and Gaza, connected by a series of roads, bridges and tunnels.