Mahmoud Abbas has renewed a warning against plans by the incoming US government to move its Israel embassy to Jerusalem as he formally opened a Palestinian embassy in Vatican City.

The inauguration of the Vatican-based mission on Saturday came a day before representatives from over 70 countries gather in the French capital for an Israeli-Palestinian peace conference.

"This embassy in place of pride for us and we hope all of the countries of the world will recognise the state of Palestine, because this recognition will bring us closer to the peace process," Abbas said after meeting with Pope Francis at the Vatican.

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Sunday's conference in Paris comes amid increasing concern from Palestinians over US president-elect Donald Trump's unwavering support for Israel.

Trump has repeatedly said he plans to relocate the US embassy from Tel Aviv to Jerusalem and last month chose David Friedman, a right-wing lawyer, as his ambassador to Israel.

Abbas told reporters on Saturday that if Trump went ahead with plans to move the embassy, it would hinder the peace process.

"We are waiting to see if it happens. If it does, it will not help peace and we hope it does not happen," he said.

The conference also takes place less than a month after Israel "reduced" relationships with several countries that supported a UN resolution demanding an end to settlement building.

Israel has approved tens of thousands of new settler homes in the occupied West Bank in recent years.

According to the Israeli rights group B'Tselem, more than half-a-million Israelis live in Jewish-only settlements throughout the West Bank, including in enclaves in East Jerusalem.

Abbas has said Sunday's Paris conference "may be the last chance for implementing" the two-state solution.

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The Palestinian Authority wants an independent state in the West Bank, including East Jerusalem and Gaza - areas Israel occupied in violation of international law in a 1967 war.

The Vatican City officially recognised Palestine as a sovereign state in 2016 and the pope previously referred to Abbas as an "angel of peace" during a May 2015 visit to Italy's capital, Rome.

Abbas said on Saturday the opening of the embassy in the Vatican was a sign that "the pope loves the Palestinian people", according to Ansa News Agency.

The embassy is located across the street from one of the main gates of Vatican City.

In a statement, the Vatican expressed hopes for "an end to the violence that causes unacceptable suffering to civilian populations.

"Emphasis was placed on the importance of safeguarding the sanctity of the holy places for believers of all three of the Abrahamic religions," the statement added.

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Issa Kassissieh, Palestine's ambassador to the Holy See, called the embassy opening "a significant achievement for the Palestinian people", and said the pope had taken "a moral, legal and political stand through recognising the state of Palestine along the pre-1967 borders".

The Vatican, which enjoys close relations with Israel, has steadily supported the creation of a Palestinian state, and has long sought an internationally guaranteed status for Jerusalem that safeguards its sacred nature.