
The treaty concerned the Catholic Church's activities in areas controlled by the Palestinian Authority.
The Israeli foreign ministry said it regretted the move, calling the signing of a treaty, which implies there is an official Palestinian state, "a hasty step (that) damages the prospects for advancing a peace agreement".
Read: Pope Francis to meet Palestinian president after treaty announcement
But Archbishop Paul Gallagher, the Vatican's foreign minister, said he hoped the agreement could be a "stimulus to bringing a definitive end to the long-standing Israeli-Palestinian conflict, which continues to cause suffering for both Parties".
He said he hoped that a peace process directly negotiated between Israelis and Palestinians could resume and lead to a two-state solution.
"This certainly requires courageous decisions, but it will also offer a major contribution to peace and stability in the region," he said.
Read: Pakistan urges UNSC to resolve Palestine issue
The U.N. General Assembly adopted a resolution in 2012 recognizing Palestine as an observer non-member state. This was welcomed at the time by the Vatican, which has the same observer non-member status at the United Nations.
Since then the Vatican has de facto recognized a "State of Palestine" and Pope Francis referred to it by that name when he visited the Holy Land last year.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ