Qatar will open an embassy in Baghdad, Iraq's foreign minister said on Friday, in the latest sign of improving relations between Gulf Arab countries and Iraq.

Tensions between the Sunni Muslim-ruled states of the Gulf and Iraq, which has a Shi'ite majority, have eased since Prime Minister Haider Abadi took office last year.

A rapprochement could help strengthen a regional alliance against Islamic State militants who have seized vast areas in both Iraq and neighbouring Syria.

"We have agreed to open the Qatari embassy in Baghdad to begin resuming diplomatic work," Iraqi Foreign Minister Ibrahim al-Jaafari told a news conference.

Saudi Arabia also signalled its intention to reopen an embassy in Baghdad earlier this year and has invited Abadi to visit the kingdom.

Some Gulf states have viewed Iraq as being too close to their main regional rival, Shi'ite power Iran.

Abadi's predecessor, Nouri al-Maliki, had accused both Qatar and Saudi Arabia of funding Islamic State insurgents. – Reuters