Palestinian President Mahmoud Abbas seemingly made good on his threat to drop a "bombshell" in Wednesday's speech to the UN General Assembly when he declared that the Palestinians cannot continue to be bound by 20-year-old security and economic agreements with Israel.

Israel's refusal to commit to agreements reached in the mid-1990s known as the Oslo Accords "render us an authority without real powers," Abbas said. Given that, he said, "we cannot continue to be bound" by them.

It was the Palestinian leader's most serious warning yet to Israel that he might walk away from engagement with Israel and dissolve the Palestinian Authority. He stopped short of accompanying his threat with a deadline.

He also accused Israel of sabotaging U.S. efforts to broker peace and said Israeli security operations at the Al-Aqsa mosque in Jerusalem — part of the same site as the Dome of the Rock and the Temple Mount, major religious sites for Muslims and Jews, respectively — could lead to a religious war.

Palestinian leader Mahmoud Abbas is greeted by supporters after the Palestinian flag was raised for the first time at UN headquarters on Wednesday. (Spencer Platt/Getty)

Reiterating what the Palestinian Authority has been saying for at least half a decade, Abbas said the Oslo agreements would not apply as long as Israel continues to build settlements in the West Bank and refuses to release Palestinian prisoners.

"You are all aware that Israel undermined the efforts made by the administration of President Barack Obama in past years, most recently the efforts of Secretary of State John Kerry aimed at reaching a peace agreement through negotiations," Abbas told the 193-nation General Assembly.

'Deceitful'

Israeli Prime Minister Benjamin Netanyahu's office said in response that Abbas's speech was "deceitful and encourages incitement and lawlessness in the Middle East."

"We expect and call on the [Palestinian] Authority and its leader to act responsibly and accede to the proposal of ... Israel and enter into direct negotiations with Israel without preconditions," it said, adding that Abbas "does not intend to reach a peace agreement."

Following Abbas's speech, the Palestinians then celebrated the raising of their flag at UN headquarters for the first time as a non-member observer state.

Abbas had said that the decision to raise both the Palestinian and Vatican flags at the UN would prove a "most emotional and proud day," media reports said.

Canada and 8 others opposed

Canada had joined Israel, the United States and six other countries to vote against a UN resolution to allow the Palestinians and Holy See to raise their flags at UN headquarters.

The symbolic step pursued by the Palestinians in their quest for an independent state saw 119 nations vote "yes" and 45 abstain.

The resolution allowed non-member observer states to raise their flags alongside those of the 193 UN member states. The Palestinians and the Vatican are the only two observers.

At the flag-raising ceremony, UN Secretary General Ban Ki-moon said the flag is a reminder that symbols are important.

"May the raising of this flag give rise to the hope among the Palestinian people and the international community that Palestinian statehood is achievable," he said.