The highly symbolic vote in the lower house National Assembly is not binding on French government policy but is likely to spark fury in Israel, whose Prime Minister Benjamin Netanyahu has warned it would be a "grave mistake."
MPs voted 339 to 151 in favour of a motion that invites Paris to recognise the state of Palestine "as an instrument to gain a definitive resolution of the conflict."
Palestinians are seeking to achieve statehood in Gaza and the Israeli-occupied West Bank with east Jerusalem as the capital. With little progress on reaching a settlement, they have been lobbying foreign powers for international recognition.
France is spearheading a drive at the United Nations to unfreeze the moribund peace process and the Palestinian envoy to the UN said earlier Tuesday a draft resolution could be submitted to the Security Council by mid-December.
Riyad Mansour told AFP the text was set to lay out a timeframe for negotiations on a final peace deal and possibly a deadline for Palestinian statehood.
It would also pave the way for a last-ditch international conference that France has offered to host.
"If these efforts fail. If this last attempt at a negotiated settlement does not work, then France will have to do its duty and recognise the state of Palestine without delay and we are ready to do that," Fabius told MPs on Friday.
The French vote came hot on the heels of a near unanimous vote in favour of recognising Palestine in the British and Spanish parliaments, as Europeans seek alternative ways to push forward efforts towards peace.
At a pan-European level, the European Parliament is expected to hold a vote later this month on recognising Palestine and EU foreign policy supremo Federica Mogherini is also pushing for the creation of a Palestine state.
"Governments and parliaments are taking action. That momentum will grow," said United Nations chief Ban Ki-moon last month.
However, lawmakers in Paris were more divided on the issue than their British and Spanish counterparts, reflecting the sensitivity of the debate in France, which is home to Europe's largest Jewish and Muslim communities.
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