Prime Minister John Key says New Zealand's vote for the Palestinian territories to be recognised as a state by the United Nations is in line with his government's policy.
Palestinians are rejoicing after 138 nations - including New Zealand - voted to upgrade the territories' status at the UN from entity to non-member state.
Nine countries including Israel and the United States voted against the move and 41 abstained.
Mr Key says serious consideration was given to New Zealand also abstaining.
"But I think the final conclusion we drew is that while we want the parties to sit around the table and nut out a solution, in the end it hard for us to vote against a proposition that there will be a two-state solution.
"That's been New Zealand's long-standing view," Mr Key says.
The UN vote giving Palestine independent observer status within the UN has been welcomed by both the Green and Labour Parties who say it could help break the deadlock in achieving peace in the Middle East.
The vote went before the United Nations General Assembly in New York on Thursday (EST). The result was 138-9 in favour, with 41 abstentions.
Earlier, Foreign Affairs Minister Murray McCully said a UN resolution was "a poor substitute for direct negotiations between Palestine and Israel.
Mr McCully said the main reason for supporting the resolution is that it reflects a long-standing policy of the New Zealand Government supporting both Israel and a Palestinian state.
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The Green Party said recognition of the Palestinian territories is very significant.
Foreign affairs spokesperson, Kennedy Graham said the Israel/Palestine crisis has been in a stalemate for many years and the development will have a big effect on negotiations for a durable political settlement in the Middle East.
