Iceland on Thursday formally recognized Palestine and was to establish diplomatic relations with the state, two weeks after its parliament voted in favour of the move, reported dpa.
Palestinian Foreign Minister Riyad al-Malki, who was visiting the North Atlantic country for talks with his counterpart Ossur Skarphedinsson, welcomed the decision saying it had "great meaning" and went further than previous declarations of solidarity with Palestine.
According to the decision, Iceland recognizes an independent and sovereign State of Palestine within the pre-1967 Six Day War borders.
The two ministers also discussed the Palestinian bid to join the United Nations and how to restart the peace process in the Middle East, Reykjavik said.