The result revealed Israel's isolation on the world stage, after it gained the outright support of only three major countries.
The United Nations General Assembly voted to upgrade the Palestinians' status in the world body, making it a "non-member state".
The decision was backed by 138 nations, opposed by nine, while 41 members abstained.
On the ground, nothing has changed. Israeli army checkpoints remain in place across the West Bank, Jewish settlers continue their daily lives, and the Israeli Government warns that lasting peace is a more remote prospect than ever.
An Israeli official said yesterday that Prime Minister Benjamin Netanyahu's conservative government had authorised thousands of new settlement homes on occupied land where the Palestinians, with wide foreign support, envisage their future state.
But the fact that only three major countries sided with Israel at the world forum on Thursday – the United States, Canada and the Czech Republic – underscored how isolated it has become on the international stage.
A senior official said: "Even old friends like Germany refused to stand alongside us.
"There were external factors, but it is hard not to see this as a total failure for our diplomacy, which will obviously have consequences.
Government spokesman Mark Regev said Israel was disappointed by the vote, but it was not surprised. He said: "The General Assembly can resemble the theatre of the absurd, which once a year automatically approves ludicrous, anti-Israeli resolutions."
Nonetheless, analysts said the vote exposed the gulf that has opened between Europe and Mr Netanyahu over his handling of the Western-backed administration of Palestinian President Mahmoud Abbas, and the depth of EU opposition to Jewish settlement expansion.
Direct peace talks collapsed in 2010 in a dispute over settlement-building in the occupied West Bank and East Jerusalem – land the Palestinians say belongs to them, along with Gaza.
EU diplomats warn of an approaching tipping point after which it will be impossible to carve out a viable independent state.
Gidi Grinstein, head of the Reut Institute think-tank, said: "The government has failed to appreciate the gravity of the challenge to Israel's fundamental legitimacy in Europe."
Israeli leaders said the support of Washington was paramount and warned that the Palestinians would suffer for their unilateral actions.
However, ministers have toned down their earlier threats of retaliation, warning only of severe repercussions if Mr Abbas uses his newfound position to join the International Criminal Court (ICC) in the Hague and pursue Israel for alleged war crimes.
The Palestinians say they are in no rush to go to the ICC, but the threat is there, putting pressure on Israel to come up with creative solutions to overcome the peace-talks impasse.