He condemned the U.S. plan to move its embassy in Israel from Tel Aviv to Jerusalem, sparking anger among the Palestinians and the Arab world, who see the city as the capital of their future state.
Saudi Arabia and Iran have for decades been locked in a struggle for regional supremacy that is now being played out in proxy wars in several countries, including Yemen and Syria.
Saudi Arabia, which takes over the rotating chair of the Arab summit from Jordan, announced that the current gathering would be named the "Quds (Jerusalem) Summit", a reference to U.S. President Donald Trump's decision previous year to recognize Jerusalem as the capital of Israel which Arab states condemned.
He also lauded Saudi Arabia's announcement to donate $200 million to Palestine and the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).
"We confirm that East Jerusalem is an inseparable part of the Palestinian land", Saudi King Salman said.
In an opening speech, Saudi Arabia's King Salman also criticized Iran's "blatant interference in other countries".
"We renew our strong condemnation of Iran's terrorist acts in the Arab region and reject its blatant interference in the affairs of Arab countries", he said.
There has been a clear quest and coordination with the Palestinians to launch serious and effective Palestinian-Israeli peace negotiations, end the political stalemate and proceed according to a specific timeline to end the conflict on the basis of the two-state solution, which guarantees setting up an independent Palestinian state on the June 4,1967 borders with East Jerusalem as its capital, as the only means to bring about regional security and stability.
His comments came just days after his son, powerful Crown Prince Mohammed bin Salman, 32, told reporters during a USA tour that Israel also had a "right" to its own state.
Iran has said that the Arab League should take steps towards helping restore stability in the region instead of repeating its lies and baseless allegations against Tehran.
Last month the Security Council issued a statement condemning Houthi missile attacks on Saudi, but did not name Iran.
The summit also issued the "Dhahran Declaration" which brought the viewpoint of the Arab leaders on the issues related to the region.
Saudi Arabia and allies expressed support for the strikes on Saturday, but Iraq and Lebanon have condemned them.
Tunisia will host the next Arab League summit in 2019.
Gulf Arab states have made massive donations to Syria but have not officially offered asylum to Syrians.