During the incident, which occurred on July 23, the Israel embassy security guard, identified as Ziv, shot and killed an assailant, 17, who had entered a residential building in Amman occupied by the embassy to install furniture and stabbed the Israeli guard with a screwdriver.
"Jordan will not allow ambassador Einat Shlein or the rest of the embassy staff to return until a thorough investigation has been opened" into Sunday's shooting, the official said, adding Jordan informed Israel of its decision.
Jordan's King Abdullah has said that the Israeli ambassador and embassy staff will not be permitted to return to Amman until the guard is put on trial.
The investigation is being overseen by Attorney General Avichai Mandelblit and State Prosecutor Shai Nitzan, according to Ynet.
On Monday night the entire Israeli diplomatic mission to Jordan returned to Israel with the guard and were received by Prime Minister Benjamin Netanyahu.
So far 60 out of 195 members of Jordan's parliament have signed a petition demanding that the government expel the Israeli ambassador and withdraw its ambassador from Israel, said Nabil Ghishan, an MP.
Later, they marched towards the Israel embassy, chanting slogans against Israel, including "death to Israel", "no embassy for the [Zionist] entity" and "We sacrifice our soul and our blood for the sake of Palestine".
Israel's announcement of the probe came a day after Jordan's attorney general announced that he intends to pursue murder charges in an global court against the security guard.
Israel, which questioned the guard on Thursday, said he fired in self-defense, and that the attack on him was nationalistically motivated. A second Jordanian national، reportedly the security guard's landlord، was also killed.
The king called for the security guard to be tried and accused Netanyahu of "political showmanship" and of using "this crime to score personal political points", after the Israeli leader posted photos of himself embracing the guard. He was buried on Thursday in Madaba, southwest of the capital.
The security measures at the sensitive site were met with near-daily clashes and protests by Palestinians and a boycott of the compound by Muslim worshipers.