In a significant shift in the government's position, Foreign Minister Penny Wong says recognising the existence of a Palestinian state might be the only path to peace in the Middle East.
Ms Wong has also reiterated the federal government's approval of a two-state solution to ensure peace and the long-term safety of local residents.
Australia is one of about 50 members* of the United Nations - along with the US and the UK - that has not officially recognised Palestinian statehood.
Israel has repeatedly stated its opposed to such recognition, with Israeli Prime Minister Benjamin Netanyahu saying that anyone who does so, would essentially be rewarding acts of terrorism.
But Ms Wong says a two-state solution also benefits Israel.
