Iceland has become the first western european country to recognise Palestine as an independent state.
The Icelandic parliament said in a statement on its website that it had passed a motion with 38 of 63 votes in favour of a resolution to recognse Palestine "as an independent and sovereign state" based on borders predating the six-day war of 1967.
"Iceland is the first country in western europe to take this step," Ossur Skarphedinsson, the minister for foreign affairs, told RUV, the Icelandic national broadcasting service. He said the vote had given him the authority to make a formal declaration on the government's behalf, but before doing so he would discuss the move with other Nordic countries.
The resolution, which coincided with the UN's annual day of solidarity with the Palestinian people, recognised the Palestine Liberation Organisation as the legal authority for a Palestinian state and urged Israel and Palestine to reach a peace agreement.
The vote comes shortly after the Palestinians successfully gained admission to the UN's cultural agency, Unesco. Iceland was among 11 European Unesco members to support the move.
However, the suspected failure to win the required support of nine of the security council's 15 members, and a promise from the US that it would veto any council resolution endorsing membership, threatens to stall the move for full UN membership.
In a message to the UN on Tuesday, the Palestinian leader, Mahmoud Abbas, reaffirmed Palestine's bid for membership, saying it should complement peace negotiations provided Israel was prepared to negotiate on the basis of 1967 borders.
In a message read out by Palestinian UN observer Riyad Mansour, Abbas said Palestine's decision to apply to join the UN "is our legitimate right" based on the 1947 UN resolution to partition Palestine into two states.
Icelandic MP Amal Tamimi, who was born in Palestine, welcomed her parliament's move as a first step.
"I hope that more countries will follow suit," she said.