Bahrain and Israel have agreed to fully normalise their diplomatic relations, US President Donald Trump announced on Friday.

In a tweet, Trump said that the agreement was “another historic breakthrough”, with Bahrain becoming the second Gulf country – after the UAE – to “make peace” with Israel in the last 30 days.

In a joint statement, the US, Bahraini and Israeli governments said that “opening direct dialogue and ties between these two dynamic societies and advanced economies will continue the positive transformation of the Middle East and increase stability, security and prosperity in the region.”

The statement added that Bahrain's King Hamad bin Isa Salman al-Khalifa and Israeli Prime Minister Benjamin Netanyahu "express their deep appreciation to President Trump for his dedication to peace in the region, his focus on shared challenges, and the pragmatic and unique approach he has taken to bringing their nations together."

Bahrain will join the UAE and Israel at a ceremony at the White House on Tuesday, September 15.

The announcement comes a day after Trump hinted that other Arab countries would be joining the UAE in normalising relations. The UAE-Israel agreement was announced on August 13.

"I think what ultimately will happen is you're going to have quite a few countries come in. The big ones are going to be coming in. I spoke to the king of Saudi Arabia, so we're talking. We just started the dialog. And you'll have them come in," he said.

In addition to Bahrain and the UAE, Egypt and Jordan are the only other Arab countries to normalse relations.

Netanyahu added: "Citizens of Israel, I am moved to be able to tell you that this evening, we are reaching another peace agreement with another Arab country, Bahrain. This agreement adds to the historic peace with the United Arab Emirates."

Speculation among Israeli media had been rife since early on Friday evening that a deal with Bahrain had been secured.

Egypt made peace with the Jewish state in 1979 and Jordan did so in 1994.

The UAE and Israel announced they would establish diplomatic relations on August 13.

"It took us 26 years to go from a second peace agreement to a third... but 29 days to go from a peace agreement with the third Arab state to the fourth Arab state," Netanyahu said.

"And there will be more. This is a new era of peace."

In the wake of the UAE-Israel deal, US Secretary of State Mike Pompeo embarked on a regional tour, seeking to convince countries including Bahrain, Sudan and Oman to follow suit.

A high-level Israeli source had this week suggested to a AFP that a deal with Bahrain was the closest to being secured.

Bahrain participated in a January ceremony in Washington when Trump unveiled his Middle East peace plan, which in effect gave a green light to Israeli annexation of large swathes of the occupied West Bank.

Under the normalisation agreement with the UAE, Israel agreed to suspend its planned annexations in the West Bank - but Netanyahu has insisted the plans remain on the table.