The kingdom was the only the country in the world to bar women from driving and for years had garnered negative publicity internationally for detaining women who defied the ban.
The move, which has been welcomed by the United States, represents a significant opening for women in Saudi Arabia, where women's rights have steadily and slowly gained ground over the years. Saudi women remain largely under the whim of male relatives due to guardianship laws.
Women's rights activists since the 1990s have been pushing for the right to drive, saying it represents their larger struggle for equal rights under the law.
Some ultraconservative clerics in Saudi Arabia, who wield power and influence in the judiciary and education sectors, had warned against allowing women to drive. They argued it would corrupt society and lead to sin.
The state-run Saudi Press Agency and state TV reported the news late Tuesday evening, saying King Salman decreed that both men and women to be issued drivers' licenses.
Women, however, will not be allowed to obtain licenses immediately. A committee will be formed to look into how to implement the new order, which is slated to come into effect in June 2018.
State Department spokeswoman Heather Nauert said the US is "happy" with the move, calling it "a great step in the right direction for that country." She did not comment on whether Saudi Arabia still needs to do more to ensure full rights for its female citizens.
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