The Israeli delegation, which flew into Bahrain on an El Al Israel Airlines charter flight from Ben Gurion airport in Tel Aviv, was accompanied by US Treasury Secretary Steve Mnuchin.
Bahrain and Israel have signed a joint communique to formalise nascent ties during a visit by an Israeli and US delegation to Manama to broaden cooperation that Washington has promoted as an anti-Iran bulwark and potential economic bonanza.
Bahrain followed the United Arab Emirates in agreeing last month to normalise ties with Israel, stunning Palestinians who had demanded statehood before any such regional rapprochement.
The United Arab Emirates (UAE) and Bahrain became the third and fourth Arab states to agree to normalise ties with Israel, following Egypt's peace deal with Israel in 1979 and a 1994 pact with Jordan.
Palestinians have condemned the Gulf deals with Israel as "a stab in the back" for their aspirations to establish an independent state.
In Bahrain as well, the accord has drawn anger among Bahrainis. The government of Bahrain, where a Sunni Muslim minority rules a Shia majority population, has said the deal protects its interests from Iran.
The Israeli delegation, which flew on an El Al Israel Airlines charter flight from Ben Gurion airport in Tel Aviv, was accompanied by US Treasury Secretary Steve Mnuchin.
"It was indeed an historic visit, to start opening relations between both countries," Bahraini Foreign Minister Abdullatif al Zayani said after the signing ceremony with Israel's Foreign Ministry director general, Alon Ushpiz, and National Security Adviser Meir Ben-Shabbat.
Zayani touched elbows with Ben-Shabbat, who described the step as a "promising beginning" and said the Israeli delegation was accepted "with open arms, with warmth and cordiality."
'Just the beginning'
Mnuchin described the accord as an important step in regional stability and "just the beginning of the work that is going forward."
"I think the opportunity is way beyond just investments," Mnuchin earlier told reporters on the El Al flight.
"It's in technology, building various different businesses – and in the case of Bahrain as well, really expanding the opportunities for them quite, quite, quite dramatically."
The ceremony also saw the signing of several memoranda of understanding.
They cover trade, air services, telecommunications, finance, banking and agriculture, according to a list provided by a Bahraini official.
Mnuchin and the other US officials travel on Monday to the UAE, where the accord with Israel has uncorked bilateral commerce.
On Tuesday the US dignitaries will join the UAE's first delegation to Israel.
Israel and the UAE will sign a deal on Tuesday to allow 28 weekly commercial flights between Tel Aviv's Ben Gurion airport, Dubai and Abu Dhabi, Israel's Transportation Ministry said on Sunday.