The decision was announced in a royal decree read live on state television.
Saudi officials hope that the new decision will help the country repair the self-inflicted damage it had sustained following the ban.
The move is expected to help the economy by increasing women’s participation in the workplace.
The new rule will take effect in June 2018.
According to the present rule, Saudi women must be driven to work by either a male driver or a male relative.
The decision has been lauded by the international community.
Heather Nauert, the US State Department’s spokeswoman, called it “a great step in the right direction for that country.”
Celebrating the new decree, Manal al-Sharif, a Saudi women’s rights advocate, said that with the ban on women drivers lifted, it was time for the country to annul the guardianship laws.
Sharif, who filmed herself driving in 2011 and posted the footage to YouTube to protest the law, tweeted, "#Women2Drive done#IamMyOwnGuardian in progress."
Image: Screengrab from YouTube