The domain name www.google.ps, Google's search engine for the territories, now brings up a homepage with "Palestine" written underneath the Google logo.
The move on Wednesday follows the UN nation decision last year to recognise Palestine as a "non-observer state".
"We're changing the name 'Palestinian Territories' to 'Palestine' across our products. We consult a number of sources and authorities when naming countries. In this case, we are following the lead of the UN ... and other international organisations," Google spokesman Nathan Tyler said.
The UN General Assembly in November upgraded Palestine to the status of non-member observer state by a vote of 138 votes in favour, nine against and 41 abstentions.
Palestinian authorities have since begun to use the "State of Palestine" in diplomatic correspondence and issued official stamps for the purpose.
Israel however questioned the move, saying that it raised questions about the multinational company's involvement in international politics.
"This change raises questions about the reasons behind this surprising involvement of what is basically a private internet company in international politics, and on the controversial side," Yigal Palmor, Israeli foreign ministry spokesman, told AFP news agency.
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