A Saudi delegation will travel to Baghdad in the coming week to start preparations to reopen an embassy in the Iraqi capital for the first time in 25 years, official Saudi media said on Saturday.

A thaw in the once chilly relations between Sunni-ruled Saudi Arabia and Shi'ite-led Iraq could help strengthen a regional alliance against ISIS militants who have seized territory in Iraq and Syria.

Saudi Arabia closed its Baghdad embassy in 1990 after Saddam Hussein invaded Kuwait. It has long accused Iraq of being too close to Shi'ite Iran, its main regional rival, and of encouraging sectarian discrimination against Sunnis, a charge Baghdad denies.

The Saudi move would help return Iraq to the Arab nation "after an absence since the toppling of the Saddam Hussein regime and the penetration of the Iranian regime into the joints of the Iraqi state," said Abdullah al-Askar, head of the foreign affairs committee on Saudi Arabia's Shoura Council, which advises the government on policy.

Saudi Arabia began cautious moves towards rapprochement after the appointment in August of Haider al-Abadi as Iraq's new prime minister. Senior members of the kingdom's ruling Al Saud dynasty had branded his predecessor, Nuri al-Maliki, a puppet of Iran, according to U.S. embassy cables released by WikiLeaks, and accused him of ruling Iraq only on behalf of the Shi'ites.

Citing an official foreign ministry source, the Saudi Press Agency (SPA) said that besides reopening its embassy, the kingdom also planned to set up a general consulate in Arbil, capital of Iraq's Kurdistan region.

A team from the ministry would head to Baghdad this week to liaise with Iraq on choosing and preparing buildings for both missions, so they could start work "at the earliest opportunity", SPA said.

Mustafa Alani, an Iraqi security analyst with close ties to the Saudi government, said the move was prompted by both the change in Iraqi leadership and the threat from ISIS, which staged a lightning advance across Iraq in June and is the target of U.S.-led air strikes in both Iraq and Syria.

"The Saudis think there is a gap now. If they leave Mr Abadi without help, he will be forced to go to the Iranians," he said.

"With the change of leadership, change of circumstances, they think that it's time to bring back Iraq ... to the Arab fold and to reduce the Iranian influence."