The UN General Assembly approved the de facto recognition of the sovereign state of Palestine in 2012 but the European Union and most EU countries, have yet to give official recognition.
"The conflict between Israel and Palestine can only be solved with a two-state solution, negotiated in accordance with international law," Lofven said during his inaugural address in parliament.
"A two-state solution requires mutual recognition and a will to peaceful co-existence. Sweden will therefore recognise the state of Palestine."
For the Palestinians, Sweden's move will be a welcome boost for its ambitions.
With its reputation as an honest broker in international affairs and with an influential voice in EU foreign policy, the decision may well make other countries sit up and pay attention at a time when the Palestinians are threatening unilateral moves towards statehood.
However, there is likely to be strong criticism of Sweden from Israel, as well as from the United States and the EU, which maintain that an independent Palestinian state should only emerge through a negotiated process.
Within the EU, some countries, such as Hungary, Poland and Slovakia recognise Palestine, but they did so before joining the 28-member bloc.
If the centre-left government fulfils its plans, Sweden would be the first country to recognise Palestine while being a member of the European Union.
The Social Democrats and Greens hold a minority of seats in parliament and the incoming centre-left government is likely to be one of Sweden's weakest for decades.
The former center-right government would not recognise Palestine as the Palestinian authorities did not control their territory.
The Palestinians want an independent state in the West Bank and Gaza, with its capital in East Jerusalem. While Gaza's boundaries are clearly defined, the precise territory of what would constitute Palestine in the West Bank and East Jerusalem will only be determined via negotiations with Israel on a two-state solution, negotiations which are currently suspended.
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Just what the World needs - another failed nation. Maybe Sweden can select whether Hamas or Fatah is going to run this new country because the Palestinians haven't been able to decide.
About time too
What is the land of pure doing? Are all Islamic countries following Sweden's example or somehow finding fault with their announcement? Let us support all true freedom movements not just one or two.
Careful, there is a thought coined first by the former Presient of Israel Mr Perez to have a country with two authorities, not two states per say and open borders! Is Sweden preempting the move and trying to be the first to move in that direction? Clever ploy indeed.
Rex Minor
Finally signs of rationality in a Western country though of marginal political importance.
It is time that the Europeans start making amends to this injustice being dished out to the Palistanians for decades. We salute the Swedes for their justifiable action and perhaps Norway, England, France and Germany should visit this inhuman treatment of Palistanians by Israel. One can't expect the United States to make it right with the Palistanians because of the tremendous political and economic control of Jews and Jewish lobby. One can imagine, there are about 9millions Jews out of 230 million Americans and yet they have 13 Jewish Senators out of 100 Senators in the US Senate where as Black Americans are 13-16 % of US population but they only have one Black Senator from New Jersey, think about it.
The Islamic Republic Of Pakistan Must Recognize The State Of Israel!
Shalom To All The Peace Loving Jews!
Great move. Thumbs up for sweden