"The conflict between Israel and Palestine can only be solved with a two-state solution, negotiated in accordance with international law," Swedish Prime Minister Stefan Lofven said, during his inaugural address in parliament, Al Jazeera reported.
"A two-state solution requires mutual recognition and a will to peaceful co-existence. Sweden will therefore recognise the state of Palestine."
The UN General Assembly approved the de facto recognition of the sovereign state of Palestine in 2012 but the European Union and most of its 28 members, have yet to give official recognition.
Other EU members such as Hungary, Poland and Slovakia have recognised Palestine before joining the bloc. If the centre-left government fulfils its plans, Sweden would be the first country to recognise Palestine while enjoying EU membership
For the Palestinians, Sweden's move will be a major boost. It may draw similar steps from other countries, at a time when peace talks between Palestinians and Israelis, on which the future of the Palestinian state hinges, are looking bleak.