By a vote of 60-2 with members of Mapam and Herut abstaining, the Knesset adopts a proclamation declaring Jerusalem the capital of the State of Israel. In December 1949, the cabinet had drafted the resolution following a compromise between those who wanted an official legislative act declaring the city as capital of the country and those who felt that such an action was unnecessary.
During the vote, an amendment proposed by Herut which would have made the resolution applicable to all of Jerusalem, including the Old City which at the time was occupied by Transjordan, was defeated. The two members who voted against the proposal were from the Communist party which supported an International trusteeship for the city as had been proposed by the United Nations.
On Jan 23, 1950, Israel’s legislature declared Jerusalem the capital of the State of Israel. The proclamation declared, “Whereas with establishment of the state of Israel, Jerusalem once more becomes the capital; Whereas practical difficulties which caused the Knesset and government institutions to be temporarily housed elsewhere have now for the most part been removed and the government is carrying out the transfer of its institutions to Jerusalem; The Knesset expresses the wish that construction of the seat of the government and Knesset in Jerusalem proceed speedily on the site allotted by the government for this purpose.”
When Israel established Jerusalem as the current capital in 1950, the Arab-Israeli War had already fractured the city. A concrete wall and barbed wire split the city between western Jerusalem, owned by Israel, and an eastern section, annexed by Jordan.
According to jewishcurrents.org & israeled.org