"The US decision (follows) the kingdom's repeated demands to the international community to address the issue of Iranian-backed terrorism," the official Saudi Press Agency quoted a foreign ministry source as saying.

The source welcomed the US move as a "practical and serious step" in curbing what the kingdom describes as Iranian meddling in the region.

Washington's decision on Monday marks the first time that the US has branded an arm of a foreign government a terrorist group.

It effectively means that anyone who deals with the Islamic Revolutionary Guard Corps could face prison in the United States.

President Donald Trump called the corps -- which has some 125,000 troops and vast interests across the Iranian economy -- Tehran's "primary means of directing and implementing its global terrorist campaign."

Tehran swiftly retaliated by blacklisting US Central Command as a terrorist organisation, affecting US troops serving in the wider Middle East from the Horn of Africa to Afghanistan.

Sunni powerhouse Saudi Arabia and Shiite-dominated Iran have a longstanding rivalry based as much in geostrategic interests as religious differences.

Facing off across the Gulf, the two major oil producers have taken opposing sides for decades in conflicts across the Middle East.

Riyadh broke off diplomatic relations with Tehran in 2016 in protest at the torching of its diplomatic missions by Iranian protesters angry over its execution of a leading Shiite cleric.

The Trump administration has maintained a close relationship with the Saudi leadership, despite mounting opposition over the high civilian toll from the kingdom's military intervention in neighbouring Yemen and the October murder in the Saudi consulate in Istanbul of US-based Saudi dissident Jamal Khashoggi.