US President Donald Trump, Isreali Prime Minister Benjamin Netanyahu and UAE Crown Prince Mohammed bin Zayed Al Nahyan issued a joint statement in this regard and hoped that the deal would advance peace in the Middle East, reports BBC.
It is the third treaty to be signed between Israel and an Arab nation since 1948 when Israel declared its independence.
The joint statement said: "This historic diplomatic breakthrough will advance peace in the Middle East region and is a testament to the bold diplomacy and vision of the three leaders and the courage of the United Arab Emirates and Israel to chart a new path that will unlock the great potential in the region."
In a tweet, Trump described the agreement as a huge breakthrough.
“HUGE breakthrough today! Historic Peace Agreement between our two GREAT friends, Israel and the United Arab Emirates!” he tweeted.
According to the deal, Israel will rescind its plan to annex Palestinian areas of the occupied West Bank.
Although there was no diplomatic relations between the two countries, they had unofficial contacts at different times over Iran’s regional influence.
Earlier, Israel signed a deal with Egypt in 1979 and another with Jordan in 1994.