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The United Nations voted overwhelmingly Thursday to recognize a Palestinian state, a long-sought victory for the Palestinians but an embarrassing diplomatic defeat for the United States.

The resolution upgrading the Palestinians’ status to a nonmember observer state at the United Nations was approved by a more than two-thirds majority of the 193-member world body – a vote of 138-9, with 41 abstentions.

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A Palestinian flag was quickly unfurled on the floor of the General Assembly, behind the Palestinian delegation. In the West Bank city of Ramallah, hundreds crowded into the main square waved Palestinian flags and chanted “God is great.” Others who had crowded around outdoor screens and television sets to watch the vote hugged, honked and set off fireworks before dancing in the streets.

Real independence, however, remains an elusive dream until the Palestinians negotiate a peace deal with the Israelis, who warned that the General Assembly action will only delay a lasting solution. Israel still controls the West Bank, east Jerusalem and access to Gaza, and it accused the Palestinians of bypassing negotiations with the campaign to upgrade their U.N. status.