The Septuagint reads differently here than the Masoretic.
The Masoretic (BHS) reads:
When the Most High gave to the nations their inheritance,
When He separated the children of men,
He set the borders of the peoples
According to the number of the children of Israel.
בהנחל עליון גוים בהפרידו בני אדם יצב גבלת עמים למספר בני ישראל
The Septuagint reads:
When the Most High divided the nations,
when he separated the sons of Adam,
he set the bounds of the nations
according to the number of the angels of God.
ὅτε διεμέριζεν ὁ ὕψιστος ἔθνη ὡς διέσπειρεν υἱοὺς Αδαμ ἔστησεν ὅρια
ἐθνῶν κατὰ ἀριθμὸν ἀγγέλων θεοῦ
Two Approaches to the Passage
There are two different approaches to this passage, and they either follow the Masoretic or Septuagint.
The first is that God divided the nations among the "sons of Israel." Those who translate this way favor the Masoretic.
The second sees this phrase as a reference to the divine council such as we see in the first 2 chapters of Job, 1 Kings 22, and Psalm 82. These are the same category of beings mentioned in Genesis 6. Those who translate "heavenly court" or "of the gods" generally think the Septuagint reading better reflects the original.
Because it sounds like polytheism, some translators are squeamish about the whole idea of a council of gods, so this might lead translators to favor "sons of Israel" even if they might generally favor the Septuagint.
Some may summarily dismiss the Septuagint in favor of the Masoretic, but there are a few reasons to consider it. First, the Septuagint was completed in 132 BCE which means it may correctly translate from a earlier Hebrew source than the Masoretic. Second, the divine council reading makes better sense of the passage overall. Third, the Dead Sea Scrolls agree with the Septuagint reading against the Masoretic.
The argument for divine council and against the "children of Israel" interpretation is that the nation of Israel did not exist at the time this verse is talking about: the tower of Babel when the nations were divided by the divine council. The fact they were not a nation is pointed out in verse 21 which I quote below. Also, the nations were never divided among the sons of Israel.
The same divine council language is used in the description of an event in which the nations were divided: Genesis 11:7 (ESV):
Come, let us go down and there confuse their language,...
By using the first person plural, Yahweh is addressing his council. They are the "sons of god" referred to in Deuteronomy 32.
When you read the whole passage, you see that "gods" feature prominently:
- Jacob not being led by a foreign god (v 12)
- the jealousy of strange gods being stirred (v 16)
- other nations following non-gods (v21)
- provoking Yahweh to jealously with their idols (v21)
- God mocks the gods they took refuge in (v37)
- and proclaims there is no god beside him (v39).
This last reference means no god compares with Yahweh, the Most High God, not that they do not exist.
The whole passage is about the nations following other gods, contrasted with Jacob (Israel) who was set aside by Yahweh.
The nations were divided, in part because they followed the lesser heavenly beings and not the Most High God, Yahweh. His plan was to use a people who were not even a nation to restore his rule and eventually judge the nations and their gods.
See verse 21:
They have made me jealous with what is no god;
they have provoked me to anger with their idols.
So I will make them jealous with those who are no people;
I will provoke them to anger with a foolish nation.
“Rejoice with him, O heavens;
bow down to him, all gods,
for he avenges the blood of his children
and takes vengeance on his adversaries.
He repays those who hate him
and cleanses his people's land.”
For more information, you may want to read "Deuteronomy 32:8 and the Sons of God" by Michael Heiser.