Short-term route prediction on road networks allows us to anticipate the future trajectories of road users, enabling various applications ranging from dynamic traffic control to personalized navigation. Despite recent advances in this area, existing methods focus primarily on learning sequential transition patterns, neglecting the inherent spatial relations in road networks that can affect human routing decisions. To fill this gap, this paper introduces RouteKG, a novel Knowledge Graph-based framework for route prediction. Specifically, we construct a Knowledge Graph on the road network to encode spatial relations, especially moving directions that are crucial for human navigation. Moreover, an n-ary tree-based algorithm is introduced to efficiently generate top-K routes in batch mode, enhancing computational efficiency. To further optimize prediction performance, a rank refinement module is incorporated to fine-tune candidate route rankings. The model performance is evaluated using two real-world vehicle trajectory datasets from two Chinese cities under various practical scenarios. The results demonstrate a significant improvement in accuracy over the baseline methods. We further validate the proposed method by utilizing the pre-trained model as a simulator for real-time traffic flow estimation at the link level. RouteKG has great potential to transform vehicle navigation, traffic management, and a variety of intelligent transportation tasks, playing a crucial role in advancing the core foundation of intelligent and connected urban systems. The source codes of RouteKG are available at https://github.com/YihongT/RouteKG.