Saudi and Iraqi officials toured the site on Monday and spoke with Iraqi religious pilgrims, who for the past 27 years had access to the crossing only once annually during the haj season, the Mecca newspaper reported.
The governor of Iraq's southwestern Anbar province, whose staff was on hand for the ceremonies, said the Iraqi government had deployed troops to protect the desert route leading to Arar and called its opening a "significant move" to boost ties.
"This is a great start for further future cooperation between Iraq and Saudia Arabia," said Sohaib al-Rawi.
The announcement follows a decision by the Saudi cabinet on Monday to establish a joint trade commission with Iraq.
Saudi Arabia and the United Arab Emirates are both wooing their northern neighbour in an effort to halt the growing regional influence of arch-foe Iran.
The Sunni-led Arab Gulf countries have hosted influential Iraqi Shi'ite cleric Moqtada al-Sadr for talks with their crown princes in recent weeks, rare visits after years of troubled relations.
The opening of border crossings for trade was also on a list of goals for the talks published by Sadr's office.
Sadr commands a large following among the urban poor of Baghdad and southern Iraq, and is one of few Iraqi Shi'ite leaders to keep some distance from Tehran.
The Saudi-Iraqi rapprochement extends back to 2015, when Saudi Arabia reopened its embassy in Baghdad following a 25-year break.
Saudi Foreign Minister Adel al-Jubeir visited Baghdad in February, and the two countries announced in June they would set up a coordination council to upgrade ties.
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