Australia has changed its diplomatic position in backing a United Nations resolution calling for a peaceful settlement of Palestine.

Australia was among 157 countries that supported the resolution, while eight voted against it, including the US and Israel.

The motion called for a peaceful settlement of Palestine and a just and lasting peace in the Middle East.

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.

Earlier, deputy opposition leader Sussan Ley said it was disappointing that Australia would shift its stance away from that of the US and Israel at the UN.

Sussan Ley says the decision could affect Australia's close relationship with the US. (Mick Tsikas/AAP PHOTOS)

"We still have hostages in tunnels under Gaza. We still have Hamas in the Gaza Strip, almost in control. And how is this not rewarding terrorists at this point in time?" she told Sky News on Wednesday.

"At a critical point in the relationship that we should be having with the US, this is not going to encourage that strong closeness that we need with our nearest ally when it comes to the relationship we have to have."

By Andrew Brown in Canberra