Israel's head of mission in the Moroccan capital Rabat took up his post on Tuesday.
The move came after the Israeli Cabinet approved on Sunday the US-brokered agreement reached last month with Morocco.
Morocco is the fourth Arab country to forge relations with Israel in recent months.
The Israeli foreign ministry said the head of Israel's liaison office in Rabat, Ambassador David Govrin, and his staff would work towards advancing "political dialogue, tourism, economy and cultural ties" with Morocco.
As part of the deal, the US agreed to recognise the North African country's claim over the disputed Western Sahara region.
The area is at the heart of a dispute between Morocco and the Algeria-backed Polisario Front, which has been seeking to establish an independent state.
The diplomatic offices in Tel Aviv and Rabat were shut in 2000 after the outbreak of the Palestinian uprising.
Israel signed recent agreements to normalise ties with the United Arab Emirates, Bahrain and Sudan. It already had peace agreements with Egypt and Jordan.