Qatar is to restore full diplomatic relations with regional power Iran, its foreign ministry announced Thursday, in a significant move at a time of diplomatic friction within the Gulf.

A statement from the ministry said Qatar aimed to bolster relations between the two countries, which share the world's largest natural gas field.

"The State of Qatar announced today that its ambassador to Tehran will return to exercise its diplomatic duties," read the statement.

Qatar was also seeking to "strengthen bilateral relations with the Islamic Republic of Iran in all fields", it added.

In Tehran, the foreign ministry said Qatar's decision followed a telephone conversation on Wednesday night between Foreign Minister Mohammad Javad Zarif and his Qatari counterpart, Mohammed bin Abdulrahman Al-Thani.

"During the conversation... the Qatari side expressed their desire to send their ambassador back to Tehran and we welcomed this decision," said ministry spokesman Bahram Ghassemi.

"The development of relations with our neighbours is an absolute priority" for Iran, he said.

Doha pulled its ambassador from Tehran in January 2016 following attacks on the Saudi Arabian embassy, spurred by Riyadh's decision to execute a Shia cleric in the kingdom.

The decision to restore ties comes as Qatar is locked in a diplomatic impasse with Iran's great regional rival, Saudi Arabia, which has accused Doha of ties to Shia Iran and support for Sunni Islamist extremist groups.

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