CAIRO (Reuters) - The Palestinians will seek to upgrade their status at the United Nations this month bolstered by the support of Arab countries, Islamic states and the 120-member Non-Aligned Movement, the Palestinian president said on Wednesday.

Previous Palestinian attempts to improve their formal status at the global body - a U.N. observer "entity" with no voting rights - have failed. The Palestinian foreign minister had earlier said they would ask to be made a non-member observer state at the U.N. General Assembly later this month.

"I am going this month to the U.N. General Assembly in light of the latest decision in Doha, the Islamic summit and the Non-Aligned Movement summit," Palestinian President Mahmoud Abbas told reporters at the Arab League.

He was referring to meetings in recent weeks of Arab ministers in Qatar, Islamic states in Saudi Arabia and the Non-Aligned Movement in Iran.

A Palestinian diplomat told Reuters that Abbas was referring to securing recognition as a non-member observer state, a first stage towards recognition of a Palestinian state.

A simple majority vote in the 193-member General Assembly would be enough to bestow non-member observer status, bypassing the Security Council - where the United States, Israel's ally, has a veto.

A similar statehood upgrade drive last year proved short-lived amid financial sanctions and diplomatic counter-lobbying by Israel and the United States.

"The importance of going to the General Assembly is to protect our lands by the international law," Abbas said.

Palestinians say Israeli settlement-building on occupied West Bank land has stymied prospects for a bilateral statehood deal. Disagreement over the issue led to talks stalling in 2010.

Israel has accused Abbas's government of trying to avoid negotiations which would entail territorial compromise and has asked it to reassert control over Gaza, which it lost in 2007 to Hamas.

Under its new Islamist President Mohamed Mursi, Egypt said it backed any statehood initiative by the Palestinians.

"Egypt continues to support any move decided by the Palestinian leadership to obtain full membership in the United Nations," Mursi told the Arab League in an opening address to ministers before Abbas arrived.

Full U.N. membership would, however, require approval by the Security Council - and Washington.

Mursi also called for reconciliation between Palestinian factions which are split between the Fatah movement of Abbas in Ramallah and the Islamist group Hamas, which controls Gaza.

Arab League Chief Nabil Elaraby said on Wednesday that the league backed Abbas' bid to secure U.N. non-member observer status and added that it would continue to push for full membership status for the Palestinians.

Israel has annexed East Jerusalem as its capital - a move not recognized abroad - and says it would annex swathes of West Bank settlements under any eventual peace deal. It unilaterally withdrew from Gaza in 2005.

(Reporting by Yasmine Saleh and Ayman Samir; Writing by Edmund Blair; Editing by Andrew Osborn and Pravin Char)