The decision, which takes immediate effect, was made by Arab foreign ministers at an emergency meeting in Cairo, home to the league's headquarters.
A statement announcing the decision said it was taken to contribute towards ending the “suffering” of the Syrian people and “realise their legitimate future aspirations.”
It also called for a leading Arab role in taking steps to resolve all aspects of the Syrian crisis, including security, humanitarian and political issues.
It said there was a need to deal with the fallout from Syria's civil war on neighbouring states, the region and the world at large, citing the burden of Syrian refugees, the threat of terrorism and the smuggling of narcotics.
Lebanon and Jordan have been home to hundreds of thousands of Syrian refugees for more than a decade, placing significant pressure on their resources and infrastructure. Syrians have also found refuge in countries further afield, such as Egypt, Sudan and Yemen. Many headed to western Europe to start new lives there.
Jordan has blamed the Syrian military and Iran-backed militias for the proliferation of narcotics in the region.
“We emphasise the necessity of taking effective and practical steps towards a gradual resolution of the crisis under the principle of 'one step for one step',” said the statement, suggesting that Syria's reintegration will depend on the progress it makes towards reaching a settlement.
Those steps, it added, must comply with UN Security Council Resolution 2254 of 2015, which aims to create an internationally recognised bid for peace in Syria.
New peace plan
A committee comprising the head of the Arab League and representatives from Egypt, Jordan, Iraq, Saudi Arabia and Lebanon will be set up to maintain direct communication with the Syrian government to reach a comprehensive settlement of the conflict.
The re-admission of Syria into the Arab fold is motivated in part by the desire of the region's Arab powerhouses to counterbalance the influence there of non-Arab players such as Iran, Turkey and Lebanon's Iranian-backed Hezbollah.
Like Iran, Russia has contributed to the defeat of anti-government forces in Syria and continues to maintain a military presence there, including facilities at a naval base on the Mediterranean.
Reconciliation with Mr Assad's regime and recent moves to normalise relations with Iran could also help defuse tensions in places like Yemen and Lebanon, where Tehran-backed militias wield significant political sway and firepower.
Arab League Secretary General Ahmed Aboul Gheit, speaking at a news conference after Sunday's meeting, said Syrian President Bashar Al Assad was now free to attend the Arab summit due to be held in Saudi Arabia later this month.
“When invitations for the Arab summit are sent out to member states by the host nation — Saudi Arabia — then the Syrian President Bashar Al Assad can attend if he wishes to,” he said.
Syria's foreign ministry said the decision would benefit “security” in the region.
“Syria has been following the positive trends and interactions that are currently taking place in the Arab region, and believes that these benefit all Arab countries and favour the stability, security and well-being of their peoples,” it said.
Speaking earlier, Egypt's Foreign Minister Sameh Shoukry said the decision would mark the start of a revived political process in the conflict-torn country.
At a news conference, he said: “The decision emphasises the importance that the Syrian government and other factions honour their commitments. Arab nations also have a duty to push forward a political settlement of the crisis in view of the current international stagnation, but the onus is on the Syrian government and parties.”
Sunday's resolution followed moves by various regional powers to end the isolation imposed on Damascus since 2011, when the Arab League suspended Syria's membership over the violent suppression of popular protests against President Bashar Al Assad's rule.
The protests later degenerated into a full-blown civil war that killed hundreds of thousands and forced millions of Syrians to flee to neighbouring countries.
Addressing Sunday's Arab League meeting, Mr Shoukry strongly suggested that Syria's full return to the Arab fold depended on the actions it took to peacefully end the conflict and reconcile the nation's rival factions.
“Every stage of the Syrian crisis proved that it cannot be resolved militarily and that there are no winners or losers,” he said. “We are convinced that the only way towards its settlement is a political resolution that has Syrian ownership and without foreign dictates,” he added.
He cited national reconciliation, building trust and safeguarding Syria's unity, sovereignty, Arab identity and an end to foreign meddling in its affairs.
On Friday, Jordan's Foreign Minister Ayman Safadi said Syria had enough votes among the league's 22 members to regain its seat, but acknowledged that the “symbolic return” would still involve a very “long and difficult” process.
The Arab League's meeting on Sunday comes a week after Jordan hosted in Amman Syrian Foreign Minister Faisal Mekdad and his counterparts from Egypt, Iraq and Saudi Arabia.
The ministers said in a joint statement that their meeting was “aimed at solving the Syrian crisis” in line with a 2015 UN Security Council resolution endorsing a road map for peace, and addressing the “humanitarian, political and security crisis.”
Saudi Foreign Minister Prince Faisal Bin Farhan and Iranian President Ebrahim Raisi have both visited Damascus in recent weeks, with Tehran lauding the regional push to reintegrate its Arab ally.
Syria and Saudi Arabia agreed to resume flights and consular services last month, while Tunisia has also reappointed an ambassador to Damascus.
Damascus had acknowledged that it needed to improve regional relations before a return to the league.
“The Arab League exists but then the differences within the Arab League will remain,” Mr Mekdad said last month. Syria's return may “unify” regional stances, he added.
US President Joe Biden's administration said it was “encouraged” by the Amman meeting despite Washington's opposition to bringing Mr Al Assad's regime back into the fold.
A White House National Security Council representative told The National the Biden administration was “encouraged to see the joint communique mention many priorities that we and our partners share”.
The White House said it was particularly pleased that the communique emphasised UN Security Council Resolution 2254.