The Palestinian leadership on Saturday slammed Australia's "irresponsible policies” after its recognition of west Jerusalem as Israel's capital.
The country became one of just a few to follow US President Donald Trump's lead and recognize the contested city as Israel's capital.
Australia said it would open a defense and trade office in the west of the holy city and Prime Minister Scott Morrison also committed to recognizing a future state of Palestine with east Jerusalem as its capital.
"The policies of this Australian administration have done nothing to advance the two-state solution," senior Palestinian official Saeb Erekat said in a statement, stressing the Palestinian view that the holy city remains a final-status issue in Israeli-Palestinian peace talks, which have run aground.
There was no immediate comment from Israel's government on Saturday, the Jewish Sabbath.
Morrison had earlier floated the idea that Australia may follow the contentious US move of relocating its embassy to Jerusalem from Tel Aviv, but it was seen by many Australians as a political stunt. Critics called it a cynical attempt to win votes in a by-election in October for a Sydney seat with a high Jewish population.