Palestinian president Mahmud Abbas returned home to a hero's welcome on Sunday after winning upgraded UN status, even as Israel imposed reprisals that UN chief Ban Ki-moon said dealt an "almost fatal blow" to any peace prospects.
"Now we have a state," Abbas told cheering crowds at his headquarters in the Israeli-occupied West Bank.
"Palestine has accomplished a historic achievement at the UN," he added, three days after the United Nations General Assembly granted the Palestinians non-member state observer status in a 138-9 vote.
"The world said in a loud voice... yes to the state of Palestine, yes to Palestine's freedom, yes to Palestine's independence, no to aggression, no to settlements, no to occupation," Abbas told the ecstatic audience.
But the Palestinian UN success has not been without repercussions.
Washington has warned it could withhold funds to the already cash-strapped Palestinian Authority and Israel said on Sunday that it would not transfer millions of dollars in tax duties it levies from the Palestinians.
On Friday, Israel revealed plans to build 3,000 settler homes in the West Bank including annexed east Jerusalem, and to revive a dormant project in a highly contentious area known as E1, a corridor that runs east from the far edge of the the Holy City into the heart of the West Bank.
Haaretz newspaper reported on Monday that Britain and France are considering recalling their ambassadors to Israel over its plans to build new settler homes.
"This time it won’t just be a condemnation, there will be real action taken against Israel," a senior European diplomat told the paper, which also quoted another diplomat as saying: "London is furious about the E1 decision."
Quoting diplomatic sources, the paper said Britain and France were coordinating their moves and had "discussed the extraordinary step of recalling their ambassadors from Tel Aviv for consultations" and had informed Washington accordingly.
A final decision would be taken by the countries' foreign ministers on Monday, it said.
UN leader Ban Ki-moon warned Sunday that any Israeli move to revive that project would deal an "almost fatal blow" to any prospects for peace.
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"Settlements are illegal under international law and, should the E-1 settlement be constructed, it would represent an almost fatal blow to remaining chances of securing a two-state solution," Ban's office said in a statement.
In Ramallah, Abbas pledged that after the victory at the United Nations, his "first and most important" task would be working to achieve Palestinian unity and reconciliation between his Fatah faction and the Hamas rulers of Gaza.
"We will study over the course of the coming days the steps necessary to achieve reconciliation," he said, as the crowd chanted: "The people want the end of the division."
In Gaza, Hamas official Salah Bardawil said the Islamist group was calling "for urgent meetings to achieve reconciliation."
The return was a moment of triumph for Abbas, who last year tried and failed to win the Palestinians full state membership at the United Nations.
The bid stalled in the Security Council, where the veto-wielding United States has vehemently opposed it.
The United States, Israel and a handful of other countries also opposed the Palestinian bid to upgrade their status to that of a non-member observer state, but with no vetoes available in the General Assembly, the measure easily passed.
The move gives the Palestinians access to a range of international institutions, including potentially the International Criminal Court, and raises their international profile after years of stalled peace talks with Israel.
Abbas was received with a full honour guard, descending from his car to walk along a red carpet at the Ramallah presidential headquarters known as the Muqataa, where he shook hands with waiting dignitaries.
He laid a wreath and said a brief prayer at the grave of iconic Palestinian leader Yasser Arafat, who is buried inside the presidential complex, later dedicating the UN victory to the former president's memory.
"Our people everywhere, raise your heads up high because you are Palestinians," he said. "You are stronger than the occupation... because you are Palestinians.
Abbas's return drew supporters from across the West Bank, including Bajis Bani Fadl from the northern town of Nablus.
"I came to celebrate this day because the Palestinian leadership accomplished a great achievement, and this is a joy we haven't experienced in our lives," he told AFP.