The UK's Chief Rabbi, Sir Ephraim Mirvis, called for the government to pause its decision. "It is a reward for terrorism, while the hostages remain in chains, and has been celebrated by Hamas as 'one of the fruits of 7th October'," he said.
Sources in government strongly deny the move is symbolic. They point to the first statement from Arab nations calling for Hamas to disarm and end its rule of Gaza as evidence that British recognition can shift the dial in the Middle East.
But it also puts the UK at odds with the US.
During his state visit to the UK, President Donald Trump, who is strongly opposed to recognising a Palestinian state, acknowledged he had a "disagreement" with Sir Keir on the issue.
Back at home, there is no doubt among Labour MPs that the party's position on Gaza has driven some Labour voters towards the Green Party and pro-Gaza independent candidates.
"We have been behind the curve," said one Labour MP who wants the government to go further.
"I think this is a step in the right direction," they added, but noted the majority of UN member states have long recognised a Palestinian state.
"It shows we're late," they said. "But better late than never."
Labour's difficulties over the war in Gaza began long before it came to power. In the eyes of many Muslim voters, Sir Keir's original sin was in a 2023 LBC interview shortly after the 7 October Hamas attacks, when he appeared to say Israel had the "right" to cut off water and energy to Gaza.
Then a month into the conflict, several shadow ministers resigned and 56 of his MPs rebelled over Sir Keir's refusal to back a vote for an immediate ceasefire.
Three months later in February 2024 the party changed from supporting a "humanitarian pause" to an "immediate ceasefire".
Party strategists believe some voters are still punishing them for these initial positions, and have not given them credit for the changes since then.
Officials in Downing Street argue that within a year of coming to power, Labour has driven a major shift in British policy in the Middle East. Ministers point to the fact the government has now suspended some arms export licences to Israel, sanctioned some Israeli ministers, and moved to recognise a Palestinian state.
But there is little sense this will appease the anger on Labour's backbenchers about the situation in Gaza, nor the calls for the government to go further.
Dr Simon Opher, a Labour MP blocked by Israel from entering the country this week, said the government had tried to use the threat of recognition as leverage to achieve a ceasefire but it had not worked.
"Now we have to very categorically opt out of any arms deals with Israel, stop any cooperation, and we need to think about proper trade sanctions. We still do quite a lot of trade with Israel so that will be the next logical step."
However, other Labour MPs fear the move panders to the party's left, and has not achieved anything.
"It was the final diplomatic card we had to play," one said. "You only get to do this once and actually this is not going to catalyse a peace process but drive Israelis away from it."
Others said it would please the party's members and core supporters, but was not a factor in those constituencies that would decide the next election.
"It feeds into the narrative that the government cares more about Palestinian flags than Union flags,"another Labour MP said.
"It gives the impression we care more about borders in the Middle East than the borders at Dover."
So will it make a difference to Labour's political fortunes? Few in government think so.
Some hope it might help navigate the party's conference when activists largely supportive of the Palestinian cause flock to Liverpool next week.
But, as one senior aide said, the question will be whether the situation on the ground in Gaza has changed come election time.