Iran and Saudi Arabia have agreed to re-establish relations after a seven-year diplomatic rupture which has fuelled tensions in the Gulf and deepened conflicts from Yemen to Syria.

The deal was announced after four days of previously undisclosed talks in Beijing between top security officials from the two Middle East powers.

Iran and Saudi Arabia agreed "to resume diplomatic relations between them and re-open their embassies and missions within a period not exceeding two months," according to a statement issued by Iran, Saudi Arabia and China.

"The agreement includes their affirmation of the respect for the sovereignty of states and the non-interference in internal affairs."

Saudi Arabia blamed Iran for missile and drone attacks on the kingdom's oil facilities in 2019 as well as attacks on tankers in Gulf waters.

Iran denied the charges.

Yemen's Iran-aligned Houthi movement has often carried out cross-border missile and drone attacks into Saudi Arabia, which has led a coalition fighting the Houthis, and in 2022 extended the strikes to the United Arab Emirates.

In Friday's agreement, Saudi Arabia and Iran also agreed to activate a security co-operation agreement signed in 2001 as well as another earlier accord on trade, economy and investment.

Both countries thanked China as well as Iraq and Oman for hosting earlier talks in 2021 and 2022.

The agreement was signed by Iran's top security official, Ali Shamkhani, and Saudi Arabia's national security adviser Musaed bin Mohammed Al-Aiban.

The two leading Shi'ite and Sunni Muslim powers in the Middle East have been at odds for years, and backed opposite sides in proxy wars from Yemen to Syria and elsewhere.

Saudi Arabia cut ties with Iran in 2016 after its embassy in Tehran was stormed during a dispute between the two countries over Saudi Arabia's execution of a Shi'ite Muslim cleric.

Iran's Foreign Minister Hossein Amirabdollahian said that normalising relations offered great prospects for both countries and for the Middle East, and hinted at further steps.

"The neighbourhood policy, as the key axis of the Iranian government's foreign policy, is strongly moving in the right direction and the diplomatic apparatus is actively behind the preparation of more regional steps," Amirabdollahian tweeted.

A senior Iranian security official said Friday's agreement had been endorsed by Supreme Leader Ayatollah Ali Khamenei.

"That is why Shamkhani travelled to China as the supreme leader's representative," the official told Reuters.

"The establishment wanted to show that the top authority in Iran backed this decision."