The US says it will revoke the designation of Yemen's Houthi rebels as a terrorist movement.
The reversal of the designation repeals one of former president Donald Trump's most criticised last-minute decisions.
Aid organisations are welcoming the move as having profound implications for the people of Yemen, home to the world's worst humanitarian catastrophe.
It also follows US Secretary of State Antony Blinken's first phone call with Saudi counterpart Faisal bin Farhan on Friday.
The Saudis lead a military alliance fighting Yemen's Houthis who are linked to their regional rival Iran.
Yemen has been roiled by a devastating power struggle between its government and the Houthis since late 2014.
The conflict has pushed the Arab country to the brink of famine and wrecked its health facilities.
President Joe Biden's administration announced its decision on Friday.
It had "nothing to do with our view of the Houthis and their reprehensible conduct, including attacks against civilians and kidnapping of American citizens", a State Department spokesman said.
He added the US was committed to helping Saudi Arabia defend its territory against such attacks.
"Our action is due entirely to the humanitarian consequences of this last-minute designation from the prior administration, which the United Nations and humanitarian organisations have since made clear would accelerate the world's worst humanitarian crisis."
The UN immediately underlined its support.
"The revocation of the designations will provide profound relief to millions of Yemenis who rely on humanitarian assistance and commercial imports to meet their basic survival needs," a spokesman said on Saturday.
"It will help ensure much-needed essential goods reach them without significant delays. At a time when Yemen is at significant risk of famine, maintaining commercial imports and humanitarian assistance in adequate quantities is essential," he said.
US Senator Chris Murphy, a member of the Senate Foreign Relations Committee, said, reversing the designation was "an important decision that will save lives and, combined with the appointment of a Special Envoy, offers hope President Biden is committed to bringing the war to an end".
"This is a further, vital, correct decision to bring hope to Yemen's crisis-stricken population. The designation of Ansar Allah would have done nothing to tackle terrorism, and everything to make humanitarian aid and commercial traffic impossible," David Miliband, President of the International Rescue Committee, tweeted.
The Saudi Press Agency reported late Friday that Blinkin and Farhan discussed a number of issues of common concern.
Farhan congratulated Blinken on taking up his new post and expressed Riyadh's readiness to work with the United States to face the joint challenges and safeguard security and stability in the region.
In his first foreign policy speech as US president, Biden on Thursday declared an end to US support for a Saudi-led military campaign in Yemen.