Sweden is set to become the first major European nation to officially recognize Palestine as a state.
The country's incoming Prime Minister Stefan Löfven made the announcement on Friday as he revealed his new centre-left cabinet.
The U.N. General Assembly approved the recognition of Palestine as a sovereign state in 2012, but the European Union and most EU countries do not refer to Palestine as a separate state. Those that do, including Hungary, Poland and Slovakia have been doing so since before they joined the 28-member bloc.
"The conflict between Israel and Palestine can only be solved with a two-state solution, negotiated in accordance with international law," said Löfven during his inaugural speech in parliament.
"A two-state solution requires mutual recognition and a will to peaceful co-existence. Sweden will therefore recognize the state of Palestine," he added.
Sweden's former center-right government led by Fredrik Reinfeldt did not recognize Palestine as a state, stating that the Palestinian authorities did not have full control over the area.
The country's change in direction has been welcomed by Palestinians.
Nael Touqan, Chairman of Palestinian Association of Stockholm told The Local:
"We like this news so much. This is what we have been fighting for. Our religious festival Eid starts tomorrow and we consider this as a present for all Palestinians."
"Sweden has great respect in Europe so we hope this means that other nations will follow its lead," he added. "This is the only way to pressure Israel".
Referring to Sweden's previous Foreign Minister Carl Bildt's strong presence on Twitter he also said: "We tried to persuade the last government but their spokesperson would not listen as he was too busy running the foreign ministry through his iPhone."
Palestinians want an independent state in the West Bank and Gaza, with a capital in East Jerusalem.
Gaza's boundaries are already clearly defined. But there have been intense debates over what areas should be included in the West Bank and East Jerusalem.
Negotiations between Israel and the Palestinians are currently suspended.
Phil Carmel from the European Jewish Congress which represents Jews in 40 countries including Sweden told The Local:
"This is a token move by Sweden's new government and it is ironic that Sweden recognizes a Palestinian state at a time when even Palestinians can't agree on what its borders will be."
He added: "A key principle of the European Union is to recognize future states based on negotiations and it is very sad that Sweden appears to have cast these negotiations aside and wants to label Palestine as a state before any formal agreement on its borders."
There has been intense fighting between Israel and Palestinian militants in the Gaza Strip in recent months, with some of the deadliest violence in years. But there is currently a ceasefire between the two sides.