In 2012 the United Nations (UN) General Assembly adopted a resolution recognising Palestine as an observer non-member state.
At the time this was welcomed by the Vatican, which has the same observer non-member status at the UN.
An agreement signed last year has now come into effect.
The Vatican statement read: "With reference to the Comprehensive Agreement between the Holy See and the State of Palestine, signed on 26 June 2015, the Holy See and the State of Palestine have notified each other that the procedural requirements for its entry into force have been fulfilled, under the terms of Article 30 of the same Agreement.
"The Agreement, consisting of a Preamble and 32 articles, regards essential aspects of the life and activity of the Church in Palestine, while at the same time reaffirming the support for a negotiated and peaceful solution to the conflict in the region."
According to Christian Today, the Vatican signed its first treaty with the State of Palestine in June, when urged an end to the Israeli-Palestinian conflict and voiced its support for a two-state solution.
It is thought that the Holy See is keen to have a diplomatic role in the Middle East, especially after many Christians have been leaving the region due conflicts in Syria and Iraq.
