This was fixed during the Trump administration when the US Embassy was moved to Jerusalem, but last year I found some indications that the policy was regressing back towards the Obama-era policy of not recognizing that Jerusalem was in Israel.
Here is some more evidence that things are going backwards.
The form to get visa services allows you to choose a country and then it lists what cities there are consulates and embassies. Here's what it says for Israel:
Tel Aviv is the only city in Israel. If you want services from the US Embassy for Israel in Jerusalem, you must choose the non-existent country of Jerusalem:
It looks like the State Department never updated the address of the Embassy to say what country it was in.
From what I can tell, according to the State Department, the US Embassy to Israel is in Jerusalem, but the "US Embassy Jerusalem" is not in Israel.
This should be clarified.