The UN General Assembly has overwhelmingly voted in favour of a motion allowing the Palestinian flag to be flown in front of UN buildings.
Israel strongly opposed the move and urged member states to vote against it.
The motion was passed by 119 votes, with Israel and the US among the eight countries that voted against.
Palestinian representative to the UN Riyad Mansour said ahead of the vote it would be "another step" towards solidifying Palestinian statehood.
The move comes amid growing momentum to recognise Palestinian statehood, with several states showing their support in the past year.
In May, the Vatican signed its first formal bilateral treaty recognising Palestinian statehood.
The motion called for the flags of non-member observer states like the Palestinian territories to follow the flags of member states outside UN offices.
It also means the flag of the Vatican - the only other non-member observer state - can now be raised. The resolution gives 20 days for the motion to be implemented.
Forty-five nations abstained from the vote, including the UK and many other members of the European Union.
France, Sweden, Italy, Spain, Ireland and Slovenia were among the EU states that voted in favour.
In 2012, the UN General Assembly voted to upgrade the status of the Palestinians to that of a "non-member observer state" allowing them to take part in assembly debates.
It followed a failed bid to join the international body as a full member state in 2011 because of a lack of support in the UN Security Council.
Palestinian observers say they hope to raise the flag on 30 September, when President Mahmoud Abbas is due to address world leaders at the UN General Assembly in New York.
Israel's UN representative Ron Prosor said the move was a "blatant attempt to hijack the UN", insisting that the only way Palestinians could achieve statehood was through direct negotiations.
Samantha Power, the US ambassador to the UN, said the raising of the flag was "not an alternative to negotiations [between the Palestinians and Israel], and will not bring the parties closer to peace".
But the French ambassador, Francois Delattre, said the flag was "a powerful symbol, a glimmer of hope" for the Palestinians amid the breakdown of peace talks.
Some 135 countries - many in Asia, Africa and Latin America - now recognise a Palestinian state.