Erdogan also slammed Israel for the Muezzin Bill, meant to limit the volume on Muslim calls to prayer at certain hours, saying it infringed on religious rights.
"We as Muslims should visit Al-Quds [Jerusalem] more often", Erdogan said.
Israel supports the US moving its embassy.
Initially, the Prime Minister's Bureau was considering not publically responding to Erdogan's statements, but after his comments were widely reported on in Israeli and global media, Prime Minister Benjamin Netanyahu instructed the Foreign Ministry otherwise.
The director of Israel's foreign ministry Yuval Rotem met on Tuesday with Turkey's ambassador to Israel Kemal Okem for what was termed a clarification meeting, after Israel reacted sharply to Turkish President Recep Tayyip Erdogan's critical comments of Israel.
The Israeli MFA commented on Erdogan's remarks stating: "The one who constantly violates human rights in his country must not give lessons of morality and democracy in the region".
Turkish President Recep Tayyip Erdogan has called on Muslims to stand up for the Palestinian cause, saying each day that Jerusalem remains under "occupation" is an insult to them.
More news: Wisconsin-based atheist group sues Trump over church orderErdogan accused Israel of trying to keep Jerusalem "without the Muslims".
Speaking at a conference on Jerusalem in Istanbul, Erdogan verbally lashed out at Israel on its settlement plans in West Bank and Jerusalem.
The global Forum on Al-Quds Waqfs brought together representatives of foundations, experts, academics, ministers and high-ranking officials from around the world in Istanbul to discuss the state of Muslim heritage in Jerusalem.
In 1980, Israel declared "reunited" Jerusalem its capital.
"As we celebrate 50 years of reunited Jerusalem, I invite Erdogan to visit our city and to be amazed by the reality on the ground - a reality that has changed only for the better since the Turks ruled here", the mayor said.
Monday's forum on Al-Quds waqfs aims to bring together trusts working on Jerusalem from all over the world and to establish links and to explore opportunities for cooperation among them. Palestinians see Israeli settlements as a major obstacle to reach a peace agreement, and want them dismantled.
Erdogan, a fervent supporter of Palestinians, normalised relations with Israel in June a year ago after bilateral ties deteriorated over a 2010 Israeli raid on a Gaza-bound ship that killed 10 Turkish activists.
