The Vatican has officially recognised Palestine as a state in a new treaty.
The document, which has angered Israel, addresses how the Catholic Church operates in Palestinian territory and changes its diplomatic recognition from the Palestine Liberation Organisation to the state of Palestine.
The Vatican had already been officially referring to Palestine as a state for at least a year - following the Pope's visit to the Holy Land - but the treaty is the first legal document to be negotiated between the two.
Vatican spokesman, the Rev. Federico Lombardi, said of the treaty: "Yes, it's a recognition that the state exists."
The Israeli foreign ministry said it was "disappointed" by the decision.
"This move does not promote the peace process and distances the Palestinian leadership from returning to direct and bilateral negotiations," it told the Associated Press.
It comes after the Vatican praised the UN General Assembly for recognising Palestine as a state in 2012.
However, the US and Israel argue that such a move undermines Washington-led efforts to negotiate the terms of Palestinian statehood.
Nabil Shaath, Abbas' senior aide to Palestinian President Mahmoud Abbas, said: "This is a very important recognition as the Vatican has a very important political status that stems from its spiritual status.
"We expect more EU countries to follow."
However, the Vatican and the Holy See have downplayed the development, with the foreign minister of the former, Monsignor Antoine Camilleri, saying the shift was in line with the latter's position.
In turn, the Holy See said its 2012 press statement welcoming the UN vote amounted to official recognition.
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