Riyadh cut ties after Iranian protesters attacked Saudi diplomatic missions in 2016 following the Saudi execution of revered Shiite cleric Nimr al-Nimr - just one in a series of flashpoints between the two longstanding rivals.

Friday's announcement, which follows five days of previously unannounced talks in Beijing and several rounds of dialogue in Iraq and Oman, caps a broader realignment and efforts to ease tensions in the region.

"Following talks, the Islamic Republic of Iran and the Kingdom of Saudi Arabia have agreed to resume diplomatic relations and reopen embassies and missions within two months," said the joint statement, which was published by both countries' official media.

The detente between Saudi Arabia, the world's biggest oil exporter, and Iran, a pariah for Western governments over its nuclear programme, has the potential to reshape relations across a region characterised by turbulence for decades.

Iran and Saudi Arabia support rival sides in several conflict zones including Yemen, where the Huthi rebels are backed by Tehran and Riyadh leads a military coalition supporting the government. The two sides also vie for influence in embattled Syria, Lebanon and Iraq. He also said Tehran, which has backed Damascus during its 12 years of conflict, would join efforts to reconcile Syria and Turkey, which has long supported rebel groups opposed to President Bashar al-Assad.

There has also been a rapprochement between Riyadh and Ankara since the 2018 killing of Saudi journalist and government critic Jamal Khashoggi inside the kingdom's Istanbul consulate. Turkish President Recep Tayyip Erdogan has pushed hard to revive ties, a move analysts describe as largely driven by economic considerations.