Libya has welcomed the decision by Saudia Arabia and Iran to resume diplomatic relations and re-open their embassies in Riyadh and Tehran.

A statement by Libya's Foreign Ministry on Saturday said the agreement is in the interest of both countries and the region as it sets the ground for an Arab-Iranian dialogue that will help ease tension in the Middle East and the Arab Gulf.

"The agreement opens a new page for developing bilateral relations between the two countries, in which mutual respect and good neighbourliness prevail, a readout by the Foreign Ministry said.

It noted that the negotiations succeeded after continuous rounds of dialogue with the support of China and Omani and Iraqi mediation, saying that "this progress" reflects the desire of all parties to give precedence to dialogue and peaceful means as an alternative to violence and confrontation.

Saudi Press Agency announced on Friday that Riyadh and Tehran had agreed to re-establish their diplomatic relations and to re-open their embassies within two months amid a welcome from international and Arab states.