A UAE embassy will be established in Tel Aviv after it was given approval by the Cabinet on Sunday.
The country's first diplomatic mission to Israel was approved by ministers in a session chaired by Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai.
The decision follows the normalisation of relations between the Emirates and Israel last year.
On Sunday, Israel's Foreign Ministry said it opened an embassy in Abu Dhabi with the arrival of the country's envoy, Eitan Naeh.
The location is temporary until a permanent premises is found.
Mr Naeh previously served as an envoy to Turkey until he was expelled by Ankara in 2018, when relations between the two countries deteriorated.
A consulate is also expected to open in Dubai.
The announcement of the Emirati embassy in Tel Aviv was made in a tweet from the UAE government press office after the first Cabinet meeting of 2021.
It followed a busy agenda that touched on plans for the economy and amendments to the visa system that would allow an expat university student to sponsor their parents and family to live in the UAE, if they were financially able.
"UAE embassy in Tel Aviv, state of Israel. Mabrook, Mazal Tov, and congratulations," Emirati businessman Hassan Sajwani wrote on Twitter.
Embassy delayed by pandemic
Later, the UAE Ministry of Foreign Affairs and International Cooperation said the pandemic had led to a delay in plans to open the embassy.
"At present, the process of opening the embassy has been impacted by current movement restrictions in place in Israel to curb the Covid-19 pandemic," a statement read.
"With UAE and Israeli efforts to lead the world’s fastest vaccination campaigns, we remain hopeful that the situation will improve and that the process of opening the embassy can be completed soon."
Since the deal to establish diplomatic and commercial ties was signed at the White House in September, daily air services have connected Emirati cities with Israel's commercial capital of Tel Aviv.
Israeli tourists have flocked to Dubai in particular, while Emiratis and expatriates have visited Israel's cities, although a recent surge in Covid-19 cases in both countries has made travel more difficult.
Last month, Morocco followed the UAE, Bahrain and Sudan in moving towards normal relations with Israel, as part of deals brokered by the administration of former US president Donald Trump.
