Iran and Bahrain have agreed to start talks about the release of Iranian funds frozen in Bahrain and resuming diplomatic ties, Iran's state media reported on Monday.
On Sunday, Bahrain's state news agency said the two countries have agreed to start discussing re-establishing political relations.
"The two parts have agreed to hold technical negotiations to free Iranian funds frozen in Bahrain," Iran's state media said, without elaborating on the timing of the talks or the amounts involved.
The talks will be aimed at releasing funds of Iran's central bank and other banks held in Bahrain, according to the state media.
Agreement reached at a meeting in Tehran
The agreement was reached at a meeting in Tehran, in which Bahrain's minister of foreign affairs, Abdullatif Al-Zayani, and Iran's acting foreign minister, Ali Bagheri Kani, took part.
Bahrain, home to the US Navy Fifth Fleet, has long blamed Tehran for stirring up its own majority Shi'ite Muslim population against the country's Sunni monarchy.
It cut diplomatic ties with Iran in 2016 a day after Saudi Arabia did so because of attacks on the Saudi embassy in Tehran.
Last month, Bahrain's King Hamad bin Isa Al Khalifa said in a meeting with Russian President Vladimir Putin that there was no reason to postpone the resumption of diplomatic relations between the kingdom and Iran.