Chile joins other South American nations to recognise Palestine as a "full, free and sovereign" state.
Chile has become the latest South American country to officially recognise Palestine as an independent state.
"The government of Chile has adopted the resolution today recognising the existence of the state of Palestine as a free, independent and sovereign state," Alfredo Moreno, the foreign minister, said on Friday.
"Chile has permanently and consistently supported the right of the Palestinian people to constitute themselves as an independent state, in peaceful coexistence with the state of Israel," Moreno said.
Chile's decision follows a meeting in Brazil between Chilean President Sebastian Pinera and Palestinian President Mahmoud Abbas.
Brazil, Argentina, Bolivia and Ecuador last month recognised Palestine within its borders prior to 1967, and Uruguay and Paraguay are expected to join them in the coming weeks.
Cuba, Venezuela, Nicaragua and Costa Rica also recognise the Palestinian state.
'Support for peace'
Moreno said that Pinera is to travel in March to the Middle East to express his support for peace talks between the Palestinian Authority and Israel and to reinforce Chile's friendship and cooperation with both states.
The government's resolution also noted that both Jewish and Palestinian communities have been key to Chile's social, cultural, political and economic development for many years, working in harmony that should serve as a model for their both the Israeli and Palestinian states. It's a message that Pinera plans to make personally during a visit to the Middle East in March.
Chile has a community of more than 300,000 Palestinian immigrants and their descendants.
The borders of a final Palestinian state have been one of the thorniest issues in peace negotiations with Israel.
Direct talks between the two sides, the first for nearly two years, began on September 2 but stalled after a 10-month Israeli settlement-building freeze expired three weeks later.
In a New Year's Eve address, Palestinian president Mahmoud Abbas urged the international community to come up with a new peace plan after months of US diplomacy failed to secure a settlement freeze.