The United States is cancelling funding for the UN cultural body Unesco after it voted to grant full membership to the Palestinians.
The motion was passed by a substantial majority, despite strong opposition from the United States and Israel.
A US state department spokeswoman said a payment of some $60m (£37m) due next month would not be made.
Membership dues paid by the US account for about a fifth of the organisation's annual budget.
This is the first UN agency the Palestinians have sought to join since submitting their bid for recognition to the Security Council in September.
The UN Security Council will vote next month on whether to grant the Palestinians full UN membership.
Widespread applause greeted the result of Monday's vote in the chamber - of 173 countries taking part, 107 were in favour, 14 voted against and 52 abstained.
Arab states were instrumental in getting the vote passed despite intense opposition from the US.
In an emotional session, China, Russia, India, Brazil and South Africa voted in favour of Palestinian membership, while the US, Canada and Germany voted against and the UK abstained.
Membership of Unesco - perhaps best known for its World Heritage Sites - is seen by Palestinian leaders as part of a broader push to get international recognition and put pressure on Israel.
"This vote will erase a tiny part of the injustice done to the Palestinian people," Palestinian Foreign Minister Riyad al-Malki told the meeting of the UN educational, scientific and cultural organisation in Paris, after the result was announced.
One of the first moves Palestinians are set to make is to apply for world heritage status for sites on occupied Palestinian land such as the Church of the Nativity in Bethlehem, the Associated Press news agency reports.
'In a bind'
A US law passed in the 1990s bars giving funding to any UN body that admits the Palestinians as full members before an Israeli-Palestinian peace deal is reached.
"We were to have made a $60m payment to Unesco in November and we will not be making that payment," state department spokeswoman Victoria Nuland told journalists in Washington.
Ms Nuland called the Unesco move "regrettable" and "premature", but said that while continued US funding was impossible, the administration wanted to remain an active member of Unesco.
She also expressed concern over the loss of US influence and the possibility that the same scenario might unfold with other UN agencies. The administration would now consult with Congress to see how to protect US interests, she said.
The BBC's Paul Adams in Washington says the US is in a bind - it regards Unesco as a valuable UN agency, but it is also bound by the strict laws passed in the 1990s by an overwhelmingly pro-Israel Congress.
For its part, Israel called the vote a "unilateral Palestinian manoeuvre which will bring no change on the ground but further removes the possibility for a peace agreement".
"The Palestinian move at Unesco, as with similar such steps with other UN bodies, is tantamount to a rejection of the international community's efforts to advance the peace process," a foreign ministry statement said.
Peace talks between Israel and the Palestinians have been stalled since last year over the issue of Israeli settlement building.
The Israeli statement also said Israel would be considering further steps regarding its co-operation with Unesco.
Correspondents say Monday's vote is a symbolic breakthrough but that on its own it will not create a Palestinian state.
A vote is expected in November at the UN Security Council on granting full membership of the UN to the Palestinians. The US has threatened to use its veto.
No member has a right of veto in Unesco, where each representative has one vote irrespective of a country's size or budget contribution.
Unesco - like other UN agencies - is a part of the world body but has separate membership procedures and can make its own decisions about which countries belong. Full UN membership is not required for membership in many UN agencies, AP reports.
The US boycotted Unesco for almost two decades from 1984 for what the state department said was a "growing disparity between US foreign policy and Unesco goals".
A Unesco official told the BBC that if any member fails to make payments before the next general conference in two years' time they will lose voting rights, but they will still be members unless they withdraw. If they want to vote at the next general conference they have to pay a minimum amount to regain that privilege.
The official added that no decisions had been made on the budget, which has to be discussed at conference.