Israel occupied Arab east Jerusalem in the 1967 Arab-Israeli War and later annexed it in a move never recognised by the worldwide community.
In a public statement, Moro said he would hand over the reins of the sprawling Car Wash investigation to other judges in his home town of Curitiba to avoid controversy.
On the diplomatic front, the embassy move squarely aligned him with the U.S. president, and bolsters his image as a "Tropical Trump".
Brazil's would become the third embassy in a city under full Israeli control since 1967, contrary to the Palestinian view, which regards East Jerusalem as an occupied territory and the capital of their future state.
In December of previous year, President Trump reversed the longstanding USA policy of signing a continual waiver that would delay the move of the U.S. embassy to Jerusalem.
Bolsonaro on Thursday announced his intention to relocate his country's embassy from Tel Aviv to Jerusalem once he formally assumes the presidency.
He left the door open to reverse a proposal to merge the environmental and agricultural ministries after criticism from the current ministers and environmentalists.
Bolsonaro noted that Israel can now "count on having our vote in the United Nations", adding, "I know that often the vote is nearly symbolic, but it helps to define the position a country intends to take".
"To avoid worldwide pressure, among other things, I said I was ready to reverse the decision".
But his appointment also gives ammunition to Bolsonaro's opponents, who have long argued that the Car Wash probe was a politicized purge aimed at sidelining Lula and his leftist Workers Party (PT). We do not want to create problems with anyone.
Anti-corruption crusader Moro said it was an "honor" to accept Bolsonaro's offer to head a "super ministry" combining the justice and public security portfolios.
That, he said, includes "several cases when he acted to interfere in the dynamics of Brazilian politics", such as by leaking wire-tapped phone calls of Lula and impeached former President Dilma Rousseff that played a part in the downfall of both.
Moro sentenced Lula - a hugely divisive but enduringly popular figure - to jail for taking bribes from a Petrobras contractor.