Saudi Arabia has announced it will reopen its embassy in Cairo after it was shut last week following protests.
The Saudi ambassador was recalled after protesters gathered to demand the release of an Egyptian human rights lawyer being held in the kingdom.
Saudi King Abdullah ordered the reopening of the embassy and consulates in Alexandria and Suez from Sunday.
A high-level Egyptian delegation had visited the kingdom to defuse tensions.
Egyptian human rights lawyer Ahmed al-Gizawi was detained on arrival in Saudi Arabia in early April and accused of insulting King Abdullah.
His family says he had gone to perform a pilgrimage, but Saudi authorities say Gizawi was found by airport officials to be carrying drugs – allegedly more than 20,000 anti-anxiety pills – in his luggage.
Egyptian activists say he was held after lodging a complaint against Saudi Arabia for its treatment of Egyptians in its prisons.
Many Egyptians work in Saudi Arabia and some claim they have been mistreated under Saudi law.
After the protest outside the Saudi embassy in Cairo, the Saudis recalled their ambassador and closed the embassy and consulates citing safety concerns.
A high-level delegation led by Egyptian parliament speaker Saad al-Katatni and the head of the consultative council Ahmed Fahmi travelled to Saudi Arabia to meet the king and try to defuse the situation.
However, there has been no word yet on the fate of Gizawi who is thought to still be in custody in Saudi Arabia, according to BBC.
Observers say this has been the worst diplomatic falling-out between the two regional allies since Saudi Arabia severed ties after Egypt signed a peace deal with Israel in 1979.