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The Palestinians currently have observer status at the United Nations. The resolution would have granted them member status without voting privileges.

The United States, Israel, Russia and the European Union all opposed the resolution, fearing that any change in the Palestinian status would have harmed the Middle East peace process.

"Cool heads and better sense prevailed," said a spokesman at the U.S. mission to the United Nations, a view that was echoed in Washington.

It would have sent "a negative signal for the Middle East peace process and efforts under way to inject new momentum into that process," said James Foley, deputy spokesman at the U.S. State Department.

Prior to the vote, U.S. Sens. Daniel Patrick Moynihan (D-N.Y.) and Alfonse D'Amato (R-N.Y.), in a joint statement, called the Palestinians' effort to obtain non-voting member status a "major violation of its commitments to the Oslo agreements" that would "undermine the Oslo peace process in the most ominous manner."

The Israelis, who had also feared that the move would have destabilized the peace process, hailed the developments.

This is the "first time in many years that the General Assembly gathered in striking opposition against the Arab bloc," telling them "that you can't have what you want this time," said Shivi Isman, spokeswoman for the Israeli Mission to the United Nations.

Malcolm Hoenlein, executive vice chairman of the Conference of Presidents of Major American Jewish Organizations, said the withdrawal of the resolution was a "historic achievement."

For their part, the Palestinians had argued that they needed the change in status to facilitate their work at the United Nations.

Had the resolution passed, the Palestinians would have been allowed to sit in the assembly with other member states, and it would have been easier for them to participate in U.N. debates.

With the resolution effectively dead, it is not expected to come up again until next year, the U.S. spokesman said.

Meanwhile, an Arab-sponsored resolution scheduled for next week that challenges Israel's authority over the West Bank and Jerusalem is expected to be withdrawn as well, said one U.N. insider.