"It is with satisfaction that we announce our joint intention to work with the Palestinians to be able to upgrade the status of the Palestinian missions in Copenhagen and Helsinki," foreign ministers Villy Soevndal and Erkki Tuomioja, respectively of Finland and Denmark, said in a joint statement.
The changes are expected to be implemented sometime in 2013, it said.
The move would "not entail a formal bilateral recognition of a sovereign Palestinian state by Denmark and Finland," the statement said.
"But it is important to keep focused on the aim of Palestine becoming a fully recognised state and as such claim its rightful place as part of the international community of states."
In November, Denmark and Finland backed a resolution recognising the Palestinians as a non-member observer state at the UN.
The two ministers said they hoped their intentions would "encourage president Abbas to engage with determination in the necessary negotiations with the Israeli government on a two-state solution".
"We are certain, with the decision by Google to use the name 'Palestine' instead of 'Palestinian Territories' and after being recognised as an observer state at the UN, that we are continuing in the right direction," he told AFP.
Neighbouring Sweden's parliament voted in March to upgrade the Palestinian mission in Stockholm to the status of an embassy. A slew of European countries have already done the same.
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