Donald Trump proclaimed the accord by Sudan's prolonged civilian-backed government moments after he formally moved to end the nation's label of a state sponsor of terrorism, which was a vital goal for Khartoum.
Sudan on Friday admitted to be the latest Arab nation to acknowledge Israel in a political takeover announced by President Donald Trump days before US elections.
Sudan bears the added tag as an Arab nation that has been at war with Israel.
Reporters were taken into the Oval Office where Trump was on speakerphone with Sudan's leadership and Israeli Prime Minister Benjamin Netanyahu, a close affiliate of the embattled Republican president.
"This truly changes the region. It changes the lives of our peoples for the better and allows us to focus on the task of building our nations, building our future," Netanyahu was heard telling Trump.
Trump said that more Arab states are also looking to recognize Israel including regional power Saudi Arabia, home to Islam's two holiest cities.
"We have at least five more that want to come in and we will have many more than that soon," Trump said in a room packed with assistants, few of them wearing masks in spite of the Covid-19 pandemic.
Economic boon for Sudan
Both the United States and Israel are devoted to boost trade with Sudan, an destitute, conflict-ridden nation that had faced years of condemnation over its violent internal drives until the fall of dictator Omar al-Bashir last year.
In a three-way statement, Sudan and Israel said deputations would meet "in the coming weeks to work out agreements of cooperation" including in agriculture issues, aviation and migration.
"The leaders acceded to normalize relations between Sudan and Israel and to end the state of aggression between their nations," it said, without setting a date.
As part of the deal to get off the terror blacklist, the White House said that Sudan's acting government had deposited $335 million to remunerate enduring and family members of anti-US attacks that took place when Bashir's reign welcomed Al-Qaeda.
"This decision will open the door to Sudan's justified return to the international community and the international financial and banking sector, as well as to regional and international investment," Hamdok's office said in a statement that did not mention ties with Israel.
Trump had announced his plan to delist Sudan on Monday through Twitter. But in the days before he officially took the move, Israel sent a delegation to Khartoum to discuss normalization.
Secretary of State Mike Pompeo voiced hope on Wednesday that Sudan would "promptly" recognize the Jewish state -- a major cause for Trump's evangelical Christian base.
Sudan played a small part in Arab-Israeli wars and, after Israel's decisive victory in 1967, Khartoum was where the Arab League issued its famous "three no's" -- no peace, no recognition and no negotiations with Israel.
Sudan has been seeking for years to remove the tag as a state sponsor of terrorism, which severely hiders investment as few foreign businesses want to risk the rage of US prosecution.
With Trump's official move, Congress has 45 days in which it can pass a resolution to object to the delisting.
Congress is not expected to block the delisting but it must also approve legislation to grant Sudan immunity from further claims.
Until then, the $335 million will be held in an instrumental account. The money covers remuneration to enduring and family members of those killed in Al-Qaeda's twin attacks on the US embassies in Kenya and Tanzania in 1998.