The UN General Assembly, in the face of strong opposition from the US and Israel, has voted overwhelmingly to enhance Palestine's diplomatic status at the United Nations.
The resolution was approved by 138-9 on the General Assembly, which is dominated by countries sympathetic to the Palestinian cause. Britain was among 41 abstentions.
The move upgrades the Palestinian Authority's observer status at the UN to "non-member state" from "entity," placing it on the same level as the Vatican.
The announcement was greeted by wild cheers at the assembly and mass rejoicing on the streets of Ramallah in the West Bank.
ITV News's John Ray reports from the centre of the celebrations:
Palestinian President Mahmoud Abbas had urged the General Assembly to "issue a birth certificate" for the state of Palestine in an address prior to the vote in New York.
He also drew a furious response from Israel after denouncing the Jewish state from the UN podium for its "aggressive policies and the perpetration of war crimes".
Israeli Prime Minister Benjamin Netanyahu swiftly condemned Abbas' comments as "hostile and poisonous," full of "false propaganda", and "not the words of a man who wants peace."
Dismissing Thursday's resolution as "meaningless," Mr Netanyahu reiterated Israeli calls for direct talks with the Palestinians.
As expected, Israel was joined by the US in voting against the resolution in a small minority bolstered by the likes of Canada, the Czech Republic, the Marshall Islands and Panama.
US Secretary of State Hillary Clinton called the vote "unfortunate and counter-productive" and said the elevation of Palestine's status put more obstacles on the path to peace.
UN envoys, though, said Israel might not retaliate harshly against the Palestinians over the vote as long as they do not seek to join the International Criminal Court (ICC).
If the Palestinians were to join the ICC, they could file complaints with the court accusing Israel of war crimes, crimes against humanity and other serious crimes.
Explaining Britain's abstention, Foreign Secretary William Hague said the UK could only support the resolution if the Palestinians gave a commitment to an immediate and unconditional return to the negotiating table with Israel.
He said Britain also required an assurance that the Palestinians would not seek to extend the jurisdiction of the ICC over the Occupied Territories.
Shadow Foreign Secretary Douglas Alexander said the government's decision to abstain was "a historic misjudgement".
Thursday's vote was held on the 65th anniversary of the adoption of UN resolution 181 that partitioned Palestine into separate Jewish and Arab states.
Responding to the overwhelming final tally, UN Secretary-General Ban Ki-moon said: