Nearly 140 countries voted in the U.N. on Thursday to recognize the Palestinian territories as a "nonmember observer state" over the strenuous objections of Israel and the U.S., marking a milestone with potentially far-reaching consequences for the decades-old Arab-Israeli conflict.

The 138-9 vote, with 41 abstentions, came on the 65th anniversary of the assembly's resolution calling for the partition of British mandate Palestine into Jewish and Arab states.

The new status, which is akin to the Vatican's own stature in the world body, marked a rare victory for the Fatah party's diplomatic path toward statehood after its rival Hamas's military strategy had taken the spotlight during the recent Gaza conflict.

The United Nations General Assembly recognized the Palestinian territories as a nonmember state in a 138-9 vote on Nov. 29, 2012. Watch raw footage of the official announcement of the voting results at the General Assembly. (Photo: Getty Images)

During a speech at the Brookings Institute in Washington D.C. Friday, Hillary Clinton was critical of the UN resolution recognizing Palestine as a non-member observer state. Secretary Clinton said the resolution would do "nothing to advance the peace and the two-state solution we all want to see." Photo: Getty Images

Celebratory gunfire erupted as flag-waving convoys and crowds streamed into Arafat Square in Ramallah, West Bank after the U.N. voted to recognize Palestinian statehood. WSJ's Josh Mitnick reports. wsj.com/worldstream

More Video on #WorldStream Palestinian Scouts March to Celebrate Statehood

Palestinians in the West Bank city of Ramallah, who were crowded around outdoor television screens during the vote in New York erupted into applause, whistles and hugs, as some people fired guns into the air and beeped car horns in celebration.

"We didn't come here seeking to delegitimize a state established years ago, and that is Israel; rather we came to affirm the legitimacy of the state that must now achieve its independence, and that is Palestine," Mahmoud Abbas, president of the Fatah-led Palestinian Authority, told the assembly to a standing ovation.

The immediate question was whether the vote spurs or further delays the resumption of talks between Israel and the Palestinians that Israel says are needed to finalize the status of the West Bank and Gaza territories.

While Mr. Abbas argued the vote would create the momentum to resume moribund talks, the U.S. and Israel denounced the vote as a "unilateral" move in the multilateral assembly.

Palestinian Authority President Mahmoud Abbas (center) and the delegation celebrate after the United Nations General Assembly vote. AFP/Getty Images

"Today's unfortunate and counterproductive resolution places further obstacles to peace," said U.S. Ambassador Susan Rice. "No resolution can create a state where none exists."

She added, "Palestinians will wake up tomorrow and find that little has changed saved the prospect of direct talks have receded."

Israeli Prime Minister Benjamin Netanyahu dismissed the vote as an empty gesture that makes little difference for Palestinians, and makes peace prospects more remote.

"The decision at the U.N. today won't change a thing on the ground,'' he said prior to the vote. "Peace will be reached through agreements reached between Jerusalem and Ramallah, and not through declarations passed at the U.N.''

Israel and the U.S. had put intense pressure on Mr. Abbas to put off the vote, but in recent days toned down their criticism as its passage seemed inevitable.

"There's no denying it's a moral boost for them, but there's little changed in their status,'' said Yigal Palmor, a spokesman for the Israeli Foreign Ministry. "If they want to take the confrontation to other international bodies, there will be a firm response, which will be decided upon in due course."

The U.S. has been wary of weakening Mr. Abbas in the wake of the conflict in Gaza. Secretary of State Hillary Clinton visited the Palestinian leader in Ramallah last week, in part, to strengthen him in the face of Hamas's military operations against Israel, U.S. officials say.

Palestinians rallied in Nablus Thursday in support of the Palestinian U.N. bid for observer state status. European Pressphoto Agency

The State Department earlier Thursday made it clear that it would continue to work with Mr. Abbas on the peace process irrespective of the result of the U.N. vote.

"Regardless of what happens in New York today, the United States is going to continue to try to bring these parties back to the table," State Department spokeswoman, Vitoria Nuland, said. "Obviously we're going to. The resident is committed to that, and I think the only question is what kind of environment we're working in."

The U.S. Congress, however, could still penalize Mr. Abbas and his Palestinian Authority. On Thursday, lawmakers introduced three separate initiatives in response to the positive U.N. vote. Congress has threatened to cut off funding to the authority and to any U.N. agency Palestinians might join as a result of their U.N. upgrade.

One bipartisan initiative submitted by four senators, including Lindsay Graham (R., S.C.) and Charles Schumer (D., N.Y.) called for the shuttering of the Palestinian Liberation Organization's office in Washington and said aid to the Palestinian Authority should be cut off if the Palestinians supported any cases against Israel at the International Criminal Court.

"Granting United Nations membership to the Palestinian authority is a nightmare in the making for the peace process and future relations between the Congress and U.N," Sen. Graham said in a statement. "Granting a form of member-status to the Palestinians goes around the only viable way to negotiate a two state solution, that's between the parties themselves."

The vote picks up from the 1947 resolution, which the Palestinians and most Arab countries had rejected, leading to war with Israel and the Palestinians without a state. The Palestine Liberation Organization accepted the resolution when it declared independence in 1988.

The vote on Thursday ratifies the decision of the more than 130 countries that had already recognized a Palestinian state since then. Even Hamas, which had consistently opposed the U.N. bid, reversed course on Sunday, declaring its support in a tacit recognition of the vote's political implications.

Diplomats say a groundswell of support for the Palestinian Authority and its U.N. upgrade gained ground because the recent eight-day war in Gaza politically strengthened Hamas at the expense of the more pro-western Palestinian Authority.

The resolution turned the tables, bolstering the authority at Hamas's expense, they said. The authority has renounced violence, recognized Israel's right to exist and diplomats say is considered a more reliable negotiating partner than Hamas.

European countries, including Denmark, France, Spain and Switzerland, were concerned over Hamas's raised international stature after the recent Gaza conflict, diplomats said.

"The war bolstered the prestige of Hamas because of its resilience against Israel and the whole idea now is saving Abbas," said a European diplomat. "Fatah is in a politically difficult situation and the idea is to try to restore or at least heal their political wounds, and perhaps provide them with some political prestige by attaining a new status at the U.N."

As an upgraded observer state, the Palestinian territories could join treaties and specialized U.N. agencies, such as the International Civil Aviation Organization, the Law of the Sea Treaty, the Nuclear Non-Proliferation Treaty and the International Criminal Court, officials said.

That would give it legal rights over its territorial waters and air space, and would allow Palestinians to sue for control in the International Court of Justice and to bring war crimes charges against Israel in the ICC.

Mr. Abbas made no reference to joining the ICC or other treaties. But he issued an explicit warning to Israel.

"What permits the Israeli government to blatantly continue with its aggressive policies and the perpetration of war crimes stems from its conviction that it is above the law and that it has immunity from accountability and consequences," he said. "The moment has arrived for the world to say clearly: Enough of aggression, settlements and occupation."

The practical implications of Thursday's vote are far from certain. The International Court of Justice, a U.N. court, in 2004 ruled that Israel violated international law with its security barrier and called on Israel to tear down sections in East Jerusalem and the West Bank.

Israel ignored the ruling and could be expected to do the same with any future court decisions on territorial waters and air space.

If the ICC were to indict Israeli officials on war crimes charges, they couldn't be arrested on Israeli territory, though traveling to countries that are ICC members could become problematic.

As the crowd waved flags in Ramallah, Abbas supports danced to festive music with lyrics waxing nostalgic Fatah's history as an armed militia.

"This is very important. The world is going to put Palestine on the map,'' said Mohammed el Bagah, 27 years old. "I expect the economy to improve and open up. It's not going to happen over night. Things will change over time."

Write to Joe Lauria at newseditor@wsj.com and Jay Solomon at jay.solomon@wsj.com