Eritrean President Isaias Afwerki and Ethiopia’s Prime Minister Abiy Ahmed signed the agreement after arriving in Jeddah on Saturday.
UN Secretary-General Antonio Guterres described the signing as an “historic event.”
The agreement officially ends more than 20 years of war between the two countries.
King Salman honored the two leaders with the Order of King Abdulaziz.
Ethiopia and Eritrea fought a bitter war from 1998 to 2000 over a border dispute that killed tens of thousands of people.
That conflict followed a war of independence against Ethiopia that led to Eritrea separating in the early 1990s.
The two countries signed an initial agreement in July and on Tuesday reopened land border crossings closed for 20 years.
The signing ceremony was attended by Guterres, Saudi Crown Prince Mohammed bin Salman and UAE Minister of Foreign Affairs and International Cooperation Abdullah bin Zayed Al-Nahyan.
The ceremony was attended by a number of Eritrean and Ethiopian officials.
Timeline: Agreement in Jeddah ends hostilities between Eritrea and Ethiopia
Photos: Ethiopia and Eritrea sign Jeddah Peace Agreement in Saudi Arabia
Earlier on Sunday, King Salman received both Afwerki and Ahmed at the Peace Palace in Jeddah.
The Eritrean president and Ethiopian prime minister attended the official reception ceremony, in which the national anthems of the two countries were played, along with the Kingdom’s national anthem.
King Salman also greeted the official delegations accompanying both countries.
King Salman then accompanied Afwerki and Ahmed, to the Royal Reception Hall at the Royal Court, where they shook hands with several Saudi dignitaries and senior officials.
The King also hosted a luncheon for the visiting delegations.
Earlier, the King received the Secretary-General of the United Nations, Antonio Guterres, in his office at the Peace Palace in Jeddah on Sunday.
During the meeting, they reviewed developments in the international arena and various efforts aimed at achieving world peace and stability.
The meeting was attended by several Saudi officials, including Minister of Interior Prince Abdulaziz bin Saud bin Nayef, Foreign Minister Adel Al-Jubeir, and the Kingdom’s Permanent Representative to the UN Abdullah Al-Maalami.
Sources Used : arabnews.com