Yasser Abed Rabbo, general secretary of the Palestine Liberation Organisation said that Palestinian leaders had decided to take a fresh bid before the world body's General Asembly, which convenes in New York in September.
"Our decision now is to go to the General Assembly of the United Nations to pass a UN resolution against the settlements and condemn them and to emphasise its lack of legitimacy," he told AFP.
"And then we will put forward a draft to condemn the settlements to the UN Security Council."
A widely-supported Palestinian drive to win the council's condemnation of Israeli settlement was brought down in flames by a US veto on Friday after Palestinian president Mahmud Abbas ignored sweeteners and reported strong-arm tactics from the White House and refused to have the motion withdrawn.
Abed Rabbo was defiant on Saturday.
"The US veto will not stop our move toward international institutions and it will not weaken our will for freedom and independence," he said.
Saeb Erakat, a senior member of Abbas's Fatah movement who last week quit as the chief Palestinian negotiator with the Israelis, said that the latest setback called into question the usefulness of the Palestinian government.
"Israel has stripped the Palestinian Authority of its meaning and (its continued usefulness) as a tool for the independence of the Palestinian people should be reconsidered," he told AFP.
Ahead of Friday's vote, the United States had pressured the Palestinians to drop their backing for the resolution, but to no avail, with Abbas rejecting a personal appeal from Obama.
Direct talks between Israel and the Palestinians broke down late last year after the expiry of a temporary freeze on Jewish settlement activity in the West Bank.
US attempts to coax Israel into renewing the freeze ran aground in December, with the Palestinians refusing to return to the negotiating table while Jewish settlers build on land they want for a future state.
Jewish settlement activity on Palestinian land seized during the 1967 Six-Day War is considered illegal by the international community, including the United States.