The government said it would begin licensing cinemas immediately and the first movie theatres are expected to open next March, in a decision that could boost the kingdom's nascent film industry.
Reviving cinemas would represent a paradigm shift in the kingdom, which is promoting entertainment as part of a sweeping reform plan for a post-oil era, despite opposition from conservatives who have long vilified movie theatres as vulgar and sinful.
"Commercial cinemas will be allowed to operate in the Kingdom as of early 2018, for the first time in more than 35 years," the culture and information ministry said in a statement.
Like most public spaces in the kingdom, cinema halls are expected to be segregated by gender or have a separate section for families.
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Hardliners, who see cinemas as a threat to cultural and religious identity, were instrumental in shutting them down in the 1980s.
Saudi Arabia's highest-ranking cleric warned in January of the "depravity" of cinemas, saying they would corrupt morals.
But authorities appear to be shrugging off the threat, with some comparing Saudi Arabia's reform drive to a fast- moving bus -- either people get on board or risk being left behind.
Saudis themselves appear quietly astounded by the torrid pace of change -- including the historic decision allowing women to drive from next June.
The social transformation chimes with Crown Prince Mohammed bin Salman's recent pledge to return Saudi Arabia to an "open, moderate Islam" and destroy extremist ideologies.
Saudi filmmakers have long argued that a ban on cinemas does not make sense in the age of YouTube.
"It is a beautiful day in #SaudiArabia! Saudi Arabia says cinemas to get licenses in early 2018," Saudi female director Haifaa al-Mansour wrote on Twitter.
Her film "Wadjda" made history in 2013 after it became Saudi Arabia's first Academy Award entry.