Israel was defiant on Sunday over a UN vote demanding it halt settlements in Palestinian territory, after lashing out at US President Barack Obama over the "shameful" resolution.

The Security Council passed the measure Friday after the United States abstained, enabling the adoption of the first UN resolution since 1979 to condemn Israel over its settlement policy.

By deciding not to veto the move, the US took a rare step that deeply angered Israel, which accused Obama of abandoning its closest Middle East ally in the waning days of his administration.

The text was passed with support from all remaining members of the 15-member council, with applause breaking out in the chamber.

The landmark vote came despite intense lobbying efforts by Israel and calls from US President-elect Donald Trump to block the text.

While the resolution contains no sanctions, Israeli officials are concerned it could widen the possibility of prosecution at the International Criminal Court.

They are also worried it could encourage some countries to impose sanctions against Israeli settlers and goods produced in the settlements.

Prime Minister Benjamin Netanyahu rejected the resolution as a "shameful blow against Israel at the United Nations".

- 'Biased and shameful' -

"The decision that was taken was biased and shameful, but we will withstand it," the Israeli leader said.

"It will take time, but this decision will be annulled."

Netanyahu said Obama had broken a long-standing US commitment not to "dictate the terms of peace to Israel" at the UN body.

He said he had instructed the foreign ministry to review engagements at the United Nations, including funding for UN agencies and the presence of UN representatives in Israel.

The resolution, Netanyahu said, was "part of the swan song of the old world that is biased against Israel, but, my friends, we are entering a new era," he said of Trump's imminent presidency.

Trump reacted after the vote by promising change at the UN.

"As to the UN, things will be different after Jan. 20th," he tweeted referring to the date of his inauguration.

He added: "The big loss yesterday for Israel in the United Nations will make it much harder to negotiate peace. Too bad, but we will get it done anyway!" Trump said in a message on Twitter.

The US has traditionally served as Israel's diplomatic shield, protecting it from resolutions it opposes.

It is Israel's most important ally, providing it with more than $3 billion each year in defence aid.

That number will soon rise to $3.8 billion per year under a new decade-long pact, the biggest pledge of US military aid in history.

But the Obama administration has grown increasingly frustrated with settlement building in the West Bank, which Israel has occupied for nearly 50 years.

There have been growing warnings that settlement expansion is fast eroding the possibility of a two-state solution to the Israeli-Palestinian conflict, the basis of years of negotiations.

Settlements are built on land the Palestinians view as part of their future state and seen as illegal under international law.

"We cannot stand in the way of this resolution as we seek to preserve a chance of attaining our longstanding objective of two states living side by side in peace and security," said Samantha Power, the US ambassador to the UN.

"The settlement problem has gotten so much worse that it is now putting at risk the very viability of that two-state solution."

Following the vote, Israeli Justice Minister Ayelet Shaked of the far-right Jewish Home said that "we need to talk about annexation" of the West Bank.

- 'Big blow' -

Trump has signalled he is likely to be far more favourable to Israel.

Some 430,000 Israeli settlers currently live in the West Bank and a further 200,000 Israelis live in annexed east Jerusalem, which Palestinians see as the capital of their future state.

The resolution demands "Israel immediately and completely cease all settlement activities in the occupied Palestinian territory, including east Jerusalem."

It says settlements have "no legal validity" and are "dangerously imperilling the viability of the two-state solution."

Friday's vote was scheduled at the request of New Zealand, Malaysia, Senegal and Venezuela, which stepped in after Egypt put the draft resolution on hold.

After the resolution passed, Israel recalled its ambassadors to Senegal and New Zealand for consultations. It has no diplomatic relations with Venezuela or Malaysia.

A spokesman for Palestinian president Mahmud Abbas called the resolution a "big blow for Israeli policies".

Hamas, the Islamist movement that runs the Gaza Strip, also welcomed the vote.