The agreement was reached following secret negotiations between the two sides in Oslo, Norway.
The PA is also referred to as "the interim administrative organisation" that nominally governs parts of the West Bank and all of the Gaza Strip.
It was formally signed on the White House lawn by the late leaders Yasser Arafat, chairman of the Palestine Liberation Organisation (PLO) and Yitzhak Rabin, the Israeli prime minister, on 13 September 1993.
The PA became the de facto Palestinian government in 1994, with Arafat as its first president. It is now led by Mahmoud Abbas.
Its role was to bring about conditions for the Palestinians to eventually take control - in stages - of most of the West Bank and Gaza.
The PA enjoys international recognition as the organisation representing the Palestinian people and was recognised by Israel as the sole legitimate representative of the Palestinian people in the Oslo accords.
The PA receives financial assistance from donor countries, including the European Union and the US, both of which have threatened to cut aid after Hamas won parliamentary elections in January.