The 31 members of the Organisation for Economic Cooperation and Development (OECD) have voted unanimously to admit Israel to the group.
The OECD announced its decision on Monday. Two other countries, Slovenia and Estonia, were also admitted to the organisation.
Israel "will contribute to a more plural and open OECD that is playing an increasingly important role in the global economic architecture," said Angel Gurria, the OECD's secretary-general.
Membership in the OECD is largely symbolic, though analysts say it will probably improve Israel's credit rating, making it easier for the government to borrow.
Yuval Steinitz, Israel's finance minister, said the OECD's vote is of "immense importance" in an interview with Israel's Army Radio.
Other Israeli officials described the vote as a "stamp of approval" for their economy.
The unanimous vote came despite scattered opposition from several OECD member states, Palestinian officials, and international human rights groups.
Three OECD members - Switzerland, Ireland and Norway - expressed concerns about the economic data Israel provided as part of the OECD accession process.
All three states said they were concerned that the data included statistics from settlements in the occupied West Bank and East Jerusalem - land outside Israel's recognised borders.
Salam Fayyad, the Palestinian prime minister, reportedly called the heads of many OECD states over the weekend to lobby against Israel's membership.
Riyad al-Malki, the Palestinian Authority's minister of foreign affairs, warned in a letter to OECD members last week that accepting Israel would legitimise "dangerous" and "racist" policies towards Palestinians.
Several human rights groups also urged the OECD to reject Israel.