The resolution, Arab diplomats said, was meant to be a rebuke to US President George Bush's position that Israel could not be expected to give up all its West Bank settlements or accept the return of Palestinian refugees.
The 191-nation assembly voted 140-6, with 11 abstentions, to adopt the resolution on Thursday.
The resolution also made clear that Israel could not speak for the occupied territories at the United Nations.
Palestinian UN Observer Nasser al-Kidwa said the measure was of "extreme importance."
It reaffirmed that Palestinian territory occupied by Israel since 1967 was "territory under military occupation" and that the Palestinian people "have the right to self-determination and to exercise sovereignty on their territory."
The lopsided vote also demonstrated "the total isolation of the Israeli-American position," he said.
Israeli Ambassador Dan Gillerman, however, denounced the measure for failing to condemn human bomb resistance attacks against Israel or to recognise that compromise was needed on both sides.
US Deputy Ambassador James Cunningham said he voted "no" since the text was "inappropriate and ill-timed, and would detract from, rather than enhance," ongoing peace efforts.
Bush outraged Palestinians last month when he gave Israeli Prime Minister Ariel Sharon letters saying Israel could not be expected to give up all its settlements or accept the return of Palestinian refugees.