The Swedish government officially recognised the state of Palestine on Thursday, saying it hoped the move would help to revive the stalled Israeli-Palestinian peace process, SIA reports quoting the Reuters.
The decision drew praise from the Palestinian president and criticism from Israel.
"Our decision comes at a critical time because over the last year we have seen how the peace talks have stalled, how decisions over new settlements on occupied Palestinian land have complicated a two-state solution and how violence has returned to Gaza," Swedish Foreign Minister Margot Wallstrom told reporters.
"By making our decision we want to bring a new dynamic to the stalled peace process."
She rejected accusations that Sweden was taking sides and she hoped other EU countries would follow Sweden's lead.
Palestinians seek statehood in the Israeli-occupied West Bank and the blockaded Gaza Strip, with East Jerusalem as their capital. But years of efforts to forge a two-state solution with the Israelis have made next to no progress and the Palestinians now see little choice but to make a unilateral push for statehood.
Wallstrom said Sweden's move aimed at supporting moderate Palestinians and making their status more equal with that of Israel in the peace negotiations, as well as giving hope to young people on both sides.