A federal appeals court Tuesday found unconstitutional a law that gives thousands of Americans born in Jerusalem the option of listing Israel as their birthplace on U.S. passports.

In a separation-of-powers dispute centered on Middle East politics, the U.S. Court of Appeals for the District of Columbia Circuit found that the law passed by Congress in 2002 “impermissibly intrudes” on the powers of the president.

“While the president’s foreign affairs powers are not precisely defined, the courts have long recognized the president’s presumptive dominance in matters abroad,” Judge Karen LeCraft Henderson wrote in a 42-page opinion.

At issue is a provision of a 2002 foreign-relations act that challenged the U.S. policy of neutrality over the sovereignty of Jerusalem, a holy city claimed by both Israelis and Palestinians. The law allowed Jerusalem-born Americans to request that official documents list their birthplace as Israel.

Because of U.S. foreign policy regarding Jerusalem, the State Department — under Republican and Democratic administrations — has refused to follow Congress’s direction.

“Congress plainly intended to force the State Department to deviate from its decades-long position of neutrality on what nation or government, if any, is sovereign over Jerusalem,” Henderson wrote. She was joined by judges Judith W. Rogers and David S. Tatel, who also wrote a concurring opinion.

The case, which reached the Supreme Court in 2011, was brought by Ari and Naomi Zivotofsky, U.S. citizens whose son Menachem Binyamin was born in Jerusalem in 2002. The couple want their son’s passport to say he was born in Israel.

Zivotofsky attorney Nathan Lewin argued that the legislation “simply and neutrally” regulated the form and content of the passport.

Lewin said in a statement Tuesday that the “difficult case” calls for resolution by the Supreme Court. He described the State Department’s passport policy as an “isolated holdout, denying what is universally acknowledged, to the detriment of a right that a duly enacted law gives to American citizens.”

The Zivotofskys’ attorneys noted in court filings that the State Department has acknowledged inadvertently issuing passports with Israel as the birthplace to citizens born in Jerusalem and that there had been no harm done to U.S. foreign policy interests.

But the court said it found compelling the State Department’s position that the “reversal of United States policy” could “provoke uproar throughout the Arab and Muslim world and seriously damage our relations.”

The court’s opinion cited submissions from the department that argued the law “runs headlong into a carefully calibrated and long-standing executive branch policy of neutrality toward Jerusalem.”

Since Israel’s creation in 1948, Henderson wrote, U.S. presidents have “steadfastly declined to recognize any foreign nation’s sovereignty over that city.” The executive branch has made clear that the status of Jerusalem must be decided not unilaterally by the United States but by all the relevant parties.

In March 2012, the Supreme Court sent the case back to the D.C. Circuit, ruling in an 8 to 1 decision that the lower court could rule on the constitutionality of the law. The appeals court had earlier dismissed the case, writing that it posed a political question beyond the scope of the court’s authority.