Prior to the declaration, Trump and his envoys, including senior advisor and son-in-law Jared Kushner, had spent months seeking to negotiate how to restart talks between Israel and the Palestinians, which have stalled since 2014.
Future contributions would require the agency, facing heavy Israeli criticism, to demonstrate significant changes in operations, they said, adding that one suggestion under consideration would require the Palestinians to first re-enter peace talks with Israel.
The Trump administration is weighing a hefty cut to USA aid to the United Nations agency for Palestinian refugees, possibly slashing the first installment of 2018 by more than half.
UNRWA uses a much broader definition of refugee than the United Nations high commissioner, applying refugee status to "a person whose normal place of residence was Palestine during the period 1 June 1946 to 15 May 1948, and who lost both home and means of livelihood as a result of the 1948 conflict", and also to such a person's descendants.
Speaking to Palestinian faction leaders in Ramallah on Sunday, he said: "The deal of the century is the slap of the century and we will not accept it".
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Previous U.S. administrations have hewed to the worldwide consensus that East Jerusalem, which includes the Old City and its key religious sites, would be the capital of any Palestinian state.
"We completely understand the emotions the Palestinians now have".
The Council also resolved "to condemn and reject the decision of US President Donald Trump [in] recognizing Jerusalem as the capital of Israel and transferring his country's embassy from Tel Aviv to Jerusalem".
He singled out two individuals for particular criticism: "The American ambassador to Israel [David Friedman] and [the US Ambassador to the UN] Nikki Haley bring shame on the administration, if it has any self-respect".
An indignant Mr Abbas also said Mr Trump had accused them of refusing to engage in peace negotiations.
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"I am saying that Oslo, there is no Oslo".
Abbas did not mention recognition but said the Oslo accords that led to the creation of his Palestinian Authority and envisioned a final resolution to the conflict were in effect finished. "Israel ended Oslo", Mr Abbas said.
On Sunday as he opened the meeting, Palestinian president Mahmoud Abbas, who voted in favour of the suspension, called Mr Trump's peace efforts the "slap of the century".
"For years they made concessions without receiving anything in return", Mr Lavrov said at an annual press conference in Moscow.
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