Open AccessInvasion of Kuwait by Iraqi army had significant impacts on regional and international spheres. The invasion affected relations of the regional countries in particular Iran-Saudi relationship as the most influential countries in the Persian Gulf region. The present article, first, takes into consideration Iran and Saudi Arabia relations in first decade after the Islamic revolution of Iran which finally gave rise to cutting off diplomatic relations in 1988 due to some severe tensions between the two sides. Then, the article examines Iraq’s invasion of Kuwait and occupying of Kuwait city, the capital, in August 1990 which led to some significant regional developments. The study also analyzes Iran’s neutrality stance in this case as well as in Second Gulf War which was reaction of international community pertaining to the occupation. Finally, the article concludes that how Iranian rational and pragmatic decision during the crisis resulted in changing of viewpoints of regional countries in particular Saudi Arabia which eventually led to renewing of diplomatic ties of Tehran-Riyadh in March 1991 after three years frigidity.