Combined images of (From L to R) Crown Prince Mohammed bin Salman and Canadian Prime Minister Justin Trudeau.
The decision, also announced by Canada's foreign ministry, came after talks last year between Crown Prince Mohammed bin Salman and Canadian Prime Minister Justin Trudeau on the sidelines of the summit of the Asia-Pacific Economic Cooperation (APEC) Forum in Bangkok.
"It has been decided to restore the level of diplomatic relations with Canada to its previous state," Saudi's foreign ministry said in a statement.
In 2018, the Saudi government expelled Canada's ambassador and recalled its own envoy to Ottawa, while freezing all new trade over vigorous calls for the release of activists jailed in the kingdom.
On Wednesday, Canadian Foreign Minister Melanie Joly said the two countries will "appoint new ambassadors". A Canadian foreign ministry statement named Jean-Phillipe Linteau as Ottawa's new envoy to the kingdom.
Saudi Arabia made no mention of its pick for ambassador.
The reconciliation was based on "the desire for both sides to restore diplomatic relations between the two countries on the basis of mutual respect and common interests," Canada's foreign ministry said.
Saudi Arabia is the world's leading crude exporter.
In 2021, Canadian exports to Saudi Arabia amounted to $2.2 billion and imports represented $2.4 billion, according to official figures from the Canadian government.
Canadian imports consisted almost entirely of oil and petrochemicals, the government said.
* This story was edited by Ahram Online