The historic deal delivered a key foreign policy victory to President Donald Trump as he seeks re-election and reflected a changing Middle East in which shared concerns about archenemy Iran have largely overtaken traditional Arab support for the Palestinians.
A spokesman for Palestinian President Mahmoud Abbas said the deal amounts to "treason," and should be reversed.
The agreement makes the UAE the third Arab country, after Egypt and Jordan, to have full diplomatic ties with Israel. They announced it in a joint statement, saying deals between Israel and the UAE were expected in the coming weeks in such areas as tourism, direct flights and embassies.
Trump called the deal "a truly historic moment."
"Now that the ice has been broken I expect more Arab and Muslim countries will follow the United Arab Emirates," he told reporters in the Oval Office.