The assembly voted 138-9 in favor of the measure, with 41 countries abstaining.
As expected, the United States and Israel voted against the proposal, while Britain and Germany abstained. France, Italy and Spain voted in favor. Since it was not a Security Council measure, the veto held by the five permanent members does not apply.
Also voting against were Canada, the Czech Republic, Panama and a few small Pacific islands.
After the vote, the U.S. Ambassador Susan Rice called on the Palestinians and Israelis to resume peace talks."The United States calls upon both the parties to resume direct talks, without preconditions, on all the issues that divide them and we pledge that the United States will be there to support the parties vigorously in such efforts," she said after voting no, Reuters reported. "The United States will continue to urge all parties to avoid any further provocative actions in the region, in New York or elsewhere."
Speaking in Washington minutes after the vote, Secretary of State Hillary Rodham Clinton called the action “unfortunate and counterproductive.”
“We have been clear that only through direct negotiations between the parties can the Palestinians and Israelis achieve the peace they both deserve: Two states for two peoples, with a sovereign, viable and independent Palestine living side by side in peace and security with a Jewish and democratic Israel,” she said.
The BBC reported that the new upgraded status will permit the Palestinians to participate in U.N. debates, and boost their chances of joining U.N. agencies and also bodies like the International Criminal Court.
Israel's ambassador to the U.N., Ron Prosor, condemned the passage.
"The only way to reach peace is through agreements," he said, meaning not by a vote at the U.N. "No decision by the U.N. can break the 4,000-year-old bond between the people of Israel and the land of Israel.”
Israel remains adamantly opposed to granting upgraded status, asserting that the move violates the 1993 Oslo accords.
Benjamin Netanyahu, the Israeli prime minister, declared in Jerusalem: "The decision at the United Nations today won't change anything on the ground. A Palestinian state will not be established without a declaration of the end of the conflict, and a Palestinian state will not be created without real security arrangements that protect the State of Israel and its citizens.”
In an impassioned speech before the General Assembly just before the vote, Mahmoud Abbas, the president of the Palestinian Authority, warned the vote served as the "last chance to save the two-state solution" with Israel.
“The General Assembly is called upon today to issue a birth certificate of the reality of the State of Palestine," Abbas told the 193-nation group.
Abbas did not mention the ICC in his speech. But Palestinian Foreign Minister Riyad al-Maliki told reporters after the vote that if Israel continued to build illegal settlements, the Palestinians might pursue the ICC route.
"As long as the Israelis are not committing atrocities, are not building settlements, are not violating international law, then we don't see any reason to go anywhere," he said.
"If the Israelis continue with such policy -- aggression, settlements, assassinations, attacks, confiscations, building walls, violating international law -- then we have no other remedy but really to knock those to other places," Maliki said.
In Washington, a group of four Republican and Democratic senators announced legislation that would close the Palestinian office in Washington unless the Palestinians enter "meaningful negotiations" with Israel, and eliminate all U.S. assistance to the Palestinian Authority if it turns to the ICC, Reuters reported.
"I fear the Palestinian Authority will now be able to use the United Nations as a political club against Israel," said Sen. Lindsey Graham, R-S.C., one of the sponsors.