In his remarks, Netanyahu praised Morales and highlighted Guatemala and Israel's long history of close bilateral relations between the two countries.
Guatemalan President Jimmy Morales and Israeli Prime Minister Benjamin Netanyahu attended the opening ceremony for the embassy, which will be housed in an office complex in west Jerusalem, according to Reuters.
Guatemala has opened its embassy in Jerusalem, following in the footsteps of the United States, which inaugurated its embassy in the city two days prior, in a move that has triggered global condemnation.
The opening comes almost 30-years after the UN ordered Guatemala and 13 other nations to relocate their embassies from Jerusalem to Tel Aviv. "You are the second country to recognize Israel, but you had a very important role in this". "You were the second country to recognise Israel", Netanyahu said at the ceremony, referring to its founding in 1948. "We remember our friends and Guatemala is our friend, then and now".
The status of Jerusalem is one of the thorniest obstacles to forging a peace deal between Israel and the Palestinians, who with broad worldwide backing want East Jerusalem, captured by Israel in the 1967 Middle East war, as their capital.
Arab League Assistant Secretary-General Ambassador, Hossam Al Zaki, said the Arab League would convene Thursday to "discuss the emergence of a unified Arab stance against the crimes against the Palestinian people, as well as to confront the USA decision to transfer its embassy to the city of Jerusalem".
Israel captured east Jerusalem in the 1967 Mideast war, but it is not recognised by global community.
The move has infuriated Palestinians and drawn widespread global condemnation.
On Monday, tens of thousands had gathered near the border while smaller numbers of stone-throwing Palestinians approached the fence and sought to break through, with Israeli snipers positioned on the other side. United States ambassador to Israel David Friedman also attended Wednesday's ceremony.
Israel was criticised internationally for killing unarmed Palestinians.
Most of those killed were shot by Israeli snipers, the Gazan health ministry said, in the bloodiest day in the Israeli-Palestinian conflict since a 2014 Gaza war.
"We are not surprised that a president that has objected to United Nations investigations into corruption and abuses of power has made a decision to further violate worldwide resolutions".
The Guatemalan Congress recently passed a law marking May 14 as "Israel-Guatemala Friendship Day".
Following in US' footsteps, Guatemala opens its embassy in Jerusalem, despite global condemnation.