The Palestinian flag was raised for the first time at the United Nations headquarters in New York.
The ceremony took place weeks after the UN General Assembly passed a motion to allow the flag and that of the Vatican to be raised.
Israel voted against the motion along with the United States and six other countries.
Watching the ceremony was the President of the Palestinian Authority Mahmoud Abbas. Earlier he had addressed the UN General Assembly.
In his annual speech he said it was unconscionable that the question of Palestinian statehood remained unresolved.
“As long as Israel refuses to cease settlement activities and to release the fourth group of Palestinian prisoners in accordance with our agreements, they leave us no choice but to insist that we will not remain the only ones committed to the implementation of these agreements.
'Whoever is looking for peace and wants to fight terrorism, has to begin finding a solution for the Palestinian conflict,“he said.
There was a standing ovation in the Assembly while Israeli officials said they were studying the speech.
Israeli-Palestinian strife has risen sharply in recent weeks. Arab states and Palestinians have accused Israeli forces of violations at Al-Aqsa mosque, one of Islam's holiest places.
Commentators say there is a sense of growing frustration among many Palestinians over the paralysis in peace negotiations with Israel.