Foreign Minister Penny Wong said that the city’s status should be decided by Israeli-Palestinian peace talks as she revoked a contentious decision by the previous conservative government.

“Australia is committed to a two-state solution in which Israel and a future Palestinian state coexist, in peace and security, within internationally recognized borders,” Wong said. “We will not support an approach that undermines this prospect.”

Palestinian Prime Minister Mohammad Shtayyeh said that the decision was in line with international law and sent a message to Israel that the world does not accept its annexation of the Palestinian Territories.

He praised the Australian Prime Minister Anthony Albanese for the “wise and courageous” decision, which he said proved “Australia’s respect and alignment with the values of truth, justice and freedom, and the legitimate rights of the Palestinian people.”

He said that he hoped that Australia would now recognize the state of Palestine on the borders of June 4, 1967 and that Jerusalem was its capital.

Hussein Al-Sheikh, a senior Palestine Liberation Organization official, tweeted: “We value Australia’s decision on Jerusalem and its call for a two-state solution under international legitimacy, and its assertion that the future of sovereignty over Jerusalem depends on the permanent solution based on international legitimacy, which is the two-state solution.”

The Israeli government said it was disappointed with the Australian reversal.

Israel’s Foreign Ministry summoned the Australian ambassador to lodge its protest, while Prime Minister Yair Lapid said: “Jerusalem is Israel’s eternal and united capital, and nothing will ever change that.”

Ahmed Al-Deek, an adviser to the Palestinian foreign minister, told Arab News that the previous Australian government had committed a historic mistake.

“We are engaged in a diplomatic-political battle at the international level over Jerusalem, as Jerusalem constitutes the key to peace in the region, and there is no Palestinian state without Jerusalem,” he said.

“Israel is trying to persuade countries to transfer their embassies to Jerusalem and recognize it as the unified capital of Israel. We hope that the Australian move will end Israeli efforts in that context,” he added.

Al-Deek called for more reversals, as “there is almost an international consensus that Jerusalem is an integral part of the Palestinian Territories occupied in 1967. The issue is to be decided by negotiations, not by the occupation force.”

Basim Naeim, a Hamas official, said that his group considered the decision a step in the right direction for world peace and stability and “new evidence of the diplomatic failure of Israel.

“Jerusalem has been and will always be the core of the Palestinian people’s freedom struggle against the Israeli occupation,” he said.

“The Israeli occupation had been trying to impose a new reality to deny the Palestinians their rights, blatantly disregarding the international law regarding Jerusalem and its sanctities.”

He called on the international community to hold Israel’s leaders accountable for the “war crimes and crimes against humanity committed against our Palestinian people.”

Israel annexed East Jerusalem following the Six-Day War of 1967, and has declared the entire city its “eternal and indivisible capital.” Palestinians claim the eastern sector as the capital of their future state.

In 2017, the then-US President Donald Trump changed seven decades of American foreign policy by stating that Jerusalem was the capital of Israel. The US relocated its embassy from Tel Aviv to Jerusalem the following year. Several countries, including Australia, then followed Trump’s lead.