The change, introduced on 1 May, means google.ps now displays "Palestine" in Arabic and English under Google's logo.
Using the word Palestine is controversial for some. Israeli policy is that the borders of a Palestinian state are yet to be agreed.
In November, the UN gave Palestine the status of "non-member observer state".
The decision by the General Assembly was strongly opposed by Israel and the United States. Previously, Palestine only had "observer entity" status.
It followed an unsuccessful Palestinian bid to join the international body as a full member state in 2011 because of a lack of support in the UN Security Council.
Palestinians in general seek recognition for the state they are trying to establish and the adoption of the name Palestine.
Israel considers any formal use of the word Palestine as pre-judging the outcome of currently stalled peace talks. In much of Israel's official terminology the West Bank is referred to as Judea and Samaria.
In a statement given to the BBC on Friday, Google spokesman Nathan Tyler said: "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, Icann [the Internet Corporation for Assigned Names and Numbers], ISO [International Organisation for Standardisation] and other international organisations."
The Palestinian Authority (PA) welcomed Google's decision.
"This is a step in the right direction, a timely step and one that encourages others to join in and give the right definition and name for Palestine instead of Palestinian territories," Dr Sabri Saidam, advisor to Palestinian President Mahmoud Abbas, told the BBC.
"Most of the traffic that happens now happens in the virtual world and this means putting Palestine on the virtual map as well as on the geographic maps," he added.
Dr Saidam said that since the UN vote on 29 November, the PA had written to international companies, including Google, asking them to replace their usage of "Palestinian Territories" with "Palestine".
Internet giant Google has changed the tagline on the homepage of its Palestinian edition from "Palestinian Territories" to "Palestine".