The Arab League has labelled Lebanon's Hezbollah a terrorist organisation at its meeting on Friday, Egyptian state news agency MENA said.
"The Arab League foreign minister's committee has decided on Friday to consider Hezbollah a terrorist organisation," the statement said.
Since 2013 Gulf states have stepped up sanctions against Hezbollah for its support of the Assad regime in the Syrian civil-war.
The declaration came hours after the Saudi delegation stormed out of the meeting following a speech by Iraqi Foreign Minister Ibrahim al Jaafari in which he defended the Shiite Hashd Shaabi militant group.
Iraq's Army relies on the umbrella group known Hashd al Shaabi in its battle against DAESH terrorist group.
"In his speech (the minister) said that Hashd Shaabi and Hezbollah had preserved the dignity of the Arabs and those who call them terrorists are the terrorists," an Iraqi Foreign Ministry source said.
The Arab League meeting on Friday also condemned what it described as continued Iranian interference in the internal affairs of Bahrain, the statement said, adding that Hezbollah, along with the Iranian revolutionary guard, financed and trained terrorist groups in Bahrain.
Saudi's ambassador to Egypt Ahmed Kattan appeared on Al Arabiya saying Gulf states would be taking further measures against Hezbollah.
"We will deal with Hezbollah as we deal with any terrorist organisation. Saudi Arabia and the Gulf countries have begun preparing measures it will take against that terrorist party and they will be announced at the right time," Kattan said.
Morocco said last month it would not host the 2016 Arab League meeting as scheduled, saying it wanted to avoid giving a false impression of unity in the Arab world.