The bipartisan motion in Parliament was interrupted by a protester in the public gallery who shouted, "What about the UN resolution?" before being hustled out of the chamber.
Prime Minister Kevin Rudd reaffirmed Australia's commitment to a two-state solution to the Israeli-Palestinian problem, noting that the United Nations had recommended independent Jewish and Arab states 60 years ago.
"We firmly believe the establishment of an independent and economically viable Palestinian state must remain a key objective of the Israeli peace process," Rudd said. "This is important for the future, ... just as our objective must be for Israel to exist within secure and internationally recognized boundaries."
Rudd praised Israel for its "robust democracy" and said it represented a "cause for hope."
Opposition Liberal Party leader Brendan Nelson said that in a region "characterized more by theocracies or autocracies, Israel and the state of Israel is the custodian of the most fragile and yet most powerful of human emotions - that is hopeful belief in the freedom of man, freedom of speech, freedom of religion and freedom of assembly."
Nelson, who seconded the motion, said "no Australian who believes in the dignity of man, of freedom and democratic principles, should ever allow, through neglectful indifference, to allow Israel to be a stranger. To do so would be to diminish ourselves and our own security."
There was a small group of protesters outside Parliament House in Canberra and large advertisements placed in national newspapers condemning the motion.
The signatories to the advertisement, which included members of the Labor Party and heads of unions that helped finance its campaigning in the November election that saw Rudd triumph, condemned what they said was a "celebration of the triumph of racism and the ethnic cleansing of Palestinians since the al-Nakba (Catastrophe) of 1948."