The Palestinian bid for full UN membership was dealt a blow last weekend when the Security Council revealed that it lacked the necessary nine votes to bring a resolution on the issue.
This signalled a rare diplomatic victory for Israel, which succeeded in persuading at least seven Council members to not support the resolution.
Palestinian UN envoy Riyad Mansour promised to continue efforts to gain recognition.
President Mahmoud Abbas will have to decide now whether or not to continue trying to sway Security Council members or to take the alternative path of requesting "super-observer status" from the 193-member UN General Assembly as a first step towards full membership.
Meanwhile, the Israeli cabinet decided on Monday to continue the freeze on its transfer of funds to the Palestinian Authority, at least for another week.
Seven members voted against the Abbas bid
Israel stopped the flow of cash three weeks ago following the decision of Unesco to grant the Palestinian Authority full membership status.
The move was not only opposed by the international community but also by Defence Minister Ehud Barak and leading officials in Israel's security establishment. They argued that the funds actually belong to the Palestinians and that the money was needed to ensure that the Palestinian security apparatus could continue to co-ordinate its work with the IDF.
The main ministers in favour of cutting off funding to the Palestinians are Foreign Minister Avigdor Lieberman and Finance Minister Yuval Steinitz.
Prime Minister Benjamin Netanyahu decided to defer a decision until the cabinet meeting next week, partly due to the difficulties involved in re-launching talks with the Palestinians.
