RAMALLAH, West Bank — “Now we have become a state!” Mahmoud Abbas, the president of the Palestinian Authority, announced Sunday to a crowd of thousands in the courtyard of his headquarters in this Palestinian city.

Flags and balloons, a marching band, and a huge poster on the outside wall of the compound proclaiming “You are now in the State of Palestine” added a festive touch as Mr. Abbas returned home triumphant days after the United Nations General Assembly voted to enhance the standing of the Palestinians in the face of heavy Israeli and American opposition.

But an airplane flying high above the compound served as a reminder that the Palestinians have no airport, and they depend on Israeli ports for access to the high seas for shipping. The traffic was as clogged as usual around the Israeli-controlled Qalandia checkpoint, which largely seals off Ramallah from Jerusalem, the eastern part of which has now been widely endorsed as the future Palestinian capital.

At least in the short term, with Israeli elections scheduled for January, things are likely to get tougher for the Palestinians before they get better.

In Jerusalem on Sunday, the Israeli government unanimously rejected the General Assembly’s decision to upgrade the status of Palestine to a nonmember observer state of the United Nations. Prime Minister Benjamin Netanyahu described the Palestinian move as “a gross violation of the agreements that have been signed with the State of Israel.”

In its latest response, Israel said it would not transfer tax revenues it collected on behalf of the Palestinian Authority last month, instead using the money, about $100 million, to pay off about half the debt run up by the authority to the Israel Electric Corporation.

The Palestinian Authority has already been suffering through a financial crisis, often unable to pay the salaries of its employees on time. Palestinian officials said that Arab countries had promised to donate funds and make up for any losses caused by punitive Israeli actions, though it was a shortfall in donor money, largely from Arab nations, that caused the financial crisis in the first place.

Israel’s financial sanctions followed a government decision to build 3,000 previously planned housing units in contested areas of Jerusalem and in parts of the West Bank that Israel intends to keep under any future arrangement with the Palestinians. The Palestinians have long refused to return to the negotiating table unless Israel halts the construction of settlements.

The government has also decided to continue planning and zoning work for the development of a particularly contentious area of East Jerusalem known as E1, a project long condemned by Washington because it would harm the prospects for a contiguous Palestinian state, though privately, Israeli and Palestinian officials said that this last decision could be easily reversed.

Mr. Abbas, for his part, was expected to hold meetings with the members of his leadership to discuss how to begin to translate the Palestinians’ new status into practical steps.

“We are celebrating our dignity,” said Xavier Abu Eid, a Palestinian spokesman. “Our small nation withstood a lot of pressure for something that is our right.”

But the way forward may be fraught with legal obstacles as the Palestinians try to balance their diplomatic victory with the demands of their previous, more concrete achievements.

Israel signed its agreements with the Palestine Liberation Organization, which resulted in the creation of an interim self-rule body, the Palestinian Authority. Asked whether the Palestinian Authority would remain the Palestinian Authority in name, Mr. Abu Eid said: “That requires a decision of the leadership. I think it will not be changed in a day.”

Palestinian officials have insisted that they will not give up the option of seeking to join the International Criminal Court and pursuing claims against Israel, and some Palestinians now expect their leaders to take legal action against the Israelis’ settlement building.

Letters of application for membership in various United Nations bodies and international agencies have been signed “The State of Palestine.”

But the Palestinians may not rush to change the name on the front of their passports to Palestine. Even Mr. Abbas is dependent on Israel’s good graces to be allowed to travel through checkpoints and across borders.

Many Palestinians were hoping that Mr. Abbas would now seek genuine reconciliation with his rivals in Hamas, the Islamic militant group that controls Gaza.

“Unity is the most important step,” said Malik Barghouti, an employee of the authority’s Finance Ministry in Ramallah. “We are one people.”

But if there is no tangible change on the ground, some Palestinians warned, the celebrations could eventually be eclipsed by frustration.

“Most people here think we now have lots of rights,” said Mahmoud Mansour, 22, a student of electrical engineering from Jenin in the northern West Bank, who attended the welcome rally. “When they realize that nothing has changed, they will be angry.”