The nation joined 157 countries to support the resolution, while eight voted against it, including the US and Israel.
It urged Israel to "bring to an end its unlawful presence in the Occupied Palestinian Territory as rapidly as possible" while recognising the "inalienable rights of the Palestinian people, primarily the right to self-determination and the right to their independent state".
Australia's UN ambassador says a two-state solution is the only way to break the cycle of violence. (AP PHOTO)
Australia's ambassador to the UN James Larsen told the General Assembly the position reflected growing international momentum.
"A two-state solution remains the only hope of breaking the endless cycle of violence, the only hope to see a secure and prosperous future for both peoples," he said.
But Opposition Leader Peter Dutton said Australia's stance was done so for domestic political gain.
"There was a lot of anger, understandably ... with the way in which the government has sold out the Jewish community," he told reporters in Sydney on Wednesday.
"The prime minister stands condemned. Because when you ask yourself, why would the government, why would the prime minister sacrifice his credibility ... it's for votes."
Following Hamas' October 7 attack on Israel, fighting has widened in the region from Gaza to include Lebanon, Yemen and Iran.
About 1200 Israelis were killed in the Hamas offensive, with hundreds more taken hostage.
More than 45,000 Palestinians have been killed since Israel launched its retaliatory strikes on Gaza.
Australia Palestine Advocacy Network President Nasser Mashni said Australia's vote was significant, but bold action was needed.
"This is an important step by the Australian government, aligning our nation with the overwhelming majority of the world in standing up for Palestinian justice and human rights, and accountability for Israel," he said.
Opposition foreign spokesman Simon Birmingham blasted the Albanese government for putting Australia "at odds" with the US and for having "abandoned a key democratic ally in Israel".
"Overnight, Labor has changed longstanding Australian positions at the United Nations in votes that will not protect a single civilian in the Middle East, prevent further terrorist attacks or release a single hostage still held by Hamas," he said.
Sussan Ley says the decision could affect Australia's close relationship with the US. (Mick Tsikas/AAP PHOTOS)
Australia/Israel and Jewish Affairs Council Executive Director Colin Rubenstein said the resolution asked nothing of the Palestinians.
"It is woefully one-sided," he said.
"By promising the Palestinians everything they want without imposing any obligations on them whatsoever, this resolution is simply a recipe for further conflict, not peace."
In October, the coalition split from the US on the issue, disagreeing with US Vice President Kamala Harris who said her administration was working to secure a ceasefire in Gaza and Lebanon.
Opposition home affairs spokesman James Paterson at the time downplayed the breakaway.
