The PFA had proposed getting Israel suspended over the war in Gaza, accusing the Israel Football Association (IFA) of complicity in violations of international law by the Israeli government, discrimination against Arab players, and inclusion in its league of clubs located in Palestinian territory.
The IFA rejected the accusations and soccer's world governing FIFA had ordered a legal evaluation.
"The FIFA Disciplinary Committee will be mandated to initiate an investigation into the alleged offence of discrimination raised by the Palestine Football Association," FIFA said in a statement on Thursday.
The participation in Israeli football competitions of Israeli teams allegedly based in Palestinian territories will also be subject to an investigation.
"FIFA's Governance, Audit and Compliance Committee will be entrusted with the mission to investigate... the participation in Israeli competitions of Israeli football teams allegedly based in the territory of Palestine," FIFA said.
"We welcome the FIFA Council's decision to refer this case to the competent judicial bodies," the PFA said in a statement.
"(We view) it as a positive step into the right direction, based on procedural and appropriate measures, towards addressing grave violations of FIFA's statutory objectives, human rights, and the rights of its member associations.
"We are confident in the legitimacy of our demands and trust in the judicial process to deliver a just resolution within a designated time frame."
A group of UN-appointed human rights experts said that at least eight football clubs have been identified as playing in Israeli colonial settlements of the occupied West Bank.
"Such integration and conduct within the IFA amounts to recognising as legal the situation arising from the unlawful presence of Israel in the occupied Palestinian territory. This is in stark violation of international law," they said in a statement.
The PFA has said at least 92 Palestinian - non-professional - players have been killed in the war, football infrastructure has been destroyed, its leagues suspended and its national team required to play World Cup qualifiers abroad.
In its proposal, the PFA said it wanted FIFA to adopt appropriate sanctions against Israeli teams, including the national side and clubs.
