Israeli Prime Minister Benjamin Netanyahu has apologized to Turkey for a deadly naval raid in 2010 and announced a full resumption of diplomatic ties with Ankara.
After the gesture, officials from both countries said diplomatic relations had been fully restored and that ambassadors would be reinstated.
The diplomatic breakthrough was facilitated by U.S. President Barack Obama at the end of his three-day visit to Israel.
A statement from Netanyahu's office said the agreement came during a telephone call Friday between the Israeli prime minister and his Turkish counterpart, Recep Tayyip Erdogan.
The statement said Netanyahu apologized to the Turkish people for the loss of life that occurred during the 2010 raid and that he expressed regret over the deterioration in bilateral relations between the two countries.
A statement from Erdogan's office said he accepted the apology. It also said an agreement had been reached on the issue of compensation in the naval raid.
Ties between Israel and Turkey have been strained since May 2010, when Israeli commandos raided the ship, the Mavi Marmara, leading the the death of nine Turkish activists.
President Obama said Friday at a press conference in Amman that he has been encouraging Israeli and Turkish officials to repair their damaged relations. During talks earlier with Netanyahu, Obama said the time seemed right to push for a breakthrough.
Senior Obama administration officials said the U.S. president was present during Friday's phone call between the Israeli and Turkish prime ministers and they said Obama also spoke on the phone with Erdogan.
A U.S. foreign policy expert, Natan Sachs with the Brookings Institution, described the diplomatic breakthrough to VOA's Encounter program as a "huge success."
"It is really one of those rare situations in the Middle East where you have a win-win,"said Sachs. "It’s good for Israel. It is good for Turkey and it is very good for an ally of both, the United States."
The Mavi Marmara was carrying humanitarian aid to the Gaza Strip in 2010 in defiance of an Israeli blockade aimed at preventing weapons from reaching militants. A confrontation on the vessel led to the killing of nine Turkish activists and the wounding of several Israeli soldiers.