The announcement came after talks between President Abdel Fattah al-Sisi and visiting Saudi intelligence chief Prince Khaled bin Bandar bin Abdel Aziz on the coalition Washington is building against the Islamic State group (IS) in Iraq and Syria.
"In recognition of the important role played by Al-Azhar as a beacon of moderate Islam in spreading tolerant values across the region (Saudi King Abdullah) has taken the generous initiative to restore Al-Azhar," Sisi's office said.
Its top cleric, Sheikh Ahmed al-Tayeb, has condemned the jihadists of IS as "criminals (who) have been able to transmit to the world a tarnished and alarming image of Muslims."
US Secretary of State John Kerry paid tribute to Al-Azhar's role in fighting back against the group's extremist ideology during a visit to Cairo last week.
Both Egypt and Saudi Arabia are part of the regional coalition that Kerry forged during his tour.