"Given the decision by the United States government to recognize Jerusalem as the capital of Israel, Mexico's government... announces that it will maintain its embassy in Tel Aviv, as is the case so far with all countries with diplomatic ties to Israel," the ministry said.
Mexico's decision is "in keeping with" United Nations resolutions on the status of Jerusalem, the ministry added.
Earlier in the day, US President Donald Trump reversed decades of diplomatic policy by announcing the US recognizes Jerusalem as the capital of Israel and instructs the State Department to move its embassy there.
The status of Jerusalem remains one of the core issues in the Israeli-Palestinian conflict. So far, the international community does not recognize Jerusalem as the capital of Israel and no foreign countries base their embassies in the city.
"Mexico reiterates its firm belief that a political and peaceful solution to the conflict must derive from direct negotiations ... between the parties to resolve substantive problems, including the definitive status of Jerusalem," the ministry said.
Countries on the UN Security Council have called for an emergency meeting on the US announcement.