The assembly approved the upgrade despite threats by the United States and Israel to punish the Palestinians by withholding funds for the West Bank government. U.N. envoys 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.
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.
U.S. Secretary of State Hillary Clinton called the vote "unfortunate and counterproductive," while the Vatican praised the move and called for an internationally guaranteed special status for Jerusalem, something bound to irritate Israel.
The much-anticipated vote came after Abbas denounced Israel for its "aggressive policies and the perpetration of war crimes" from the U.N. podium, remarks that elicited a furious response from the Jewish state.
"Sixty-five years ago on this day, the United Nations General Assembly adopted resolution 181, which partitioned the land of historic Palestine into two states and became the birth certificate for Israel," Abbas told the assembly after receiving a standing ovation.
"The General Assembly is called upon today to issue a birth certificate of the reality of the State of Palestine," he said.
Israeli Prime Minister Benjamin Netanyahu responded quickly, condemning Abbas' critique of Israel as "hostile and poisonous," and full of "false propaganda."