Trump announces 'peace deal' between Bahrain and Israel
"The second Arab country to make peace with Israel in 30 days," he tweeted.
For decades, most Arab states have boycotted Israel, insisting they would only establish ties after the Palestinian dispute was settled. But last month the United Arab Emirates (UAE) agreed to normalise its relationship with Israel.
There had been much speculation that Bahrain might follow suit.
Mr Trump, who presented his Middle East peace plan in January aimed at resolving the Israel-Palestinian conflict, helped broker both accords.
Israel's Prime Minister Benjamin Netanyahu said he was "excited" that "another peace agreement" had been reached with another Arab country on Friday.
"This is a new era of peace. Peace for peace. Economy for economy. We have invested in peace for many years and now peace will invest in us," he said.
Bahrain is only the fourth Arab country in the Middle East to recognise Israel since its founding in 1948. The others are Egypt and Jordan.
"Another historic breakthrough today!" Mr Trump wrote on Twitter, adding: "Our two GREAT friends Israel and the Kingdom of Bahrain agree to a Peace Deal."
The president also posted on Twitter a copy of a joint statement between the three leaders - Mr Trump, Mr Netanyahu and Bahrain's Crown Prince Salman bin Hamad al-Khalifa.
"This is a historic breakthrough to further peace in the Middle East" that will "increase stability, security, and prosperity in the region", the statement reads.
Prior to the announcement of the UAE agreement in August - which included the suspension of Israel's controversial plans to annex parts of the occupied West Bank - Israel had had no diplomatic relations with Gulf Arab countries.
More recently, shared worries over Iran have led to unofficial contacts between them.
Last month saw the first official flight from Israel to the UAE, which was seen as a major step in normalising relations.
President Trump's son-in-law and senior adviser Jared Kushner, who was on the plane, described the UAE deal as having "the ability to change the whole course of the Middle East".
Bahrain last week said it would allow flights between Israel and the UAE to use its airspace.
Mr Trump is due to host a ceremony in Washington next Tuesday for the official signing of the Israel-UAE agreement.
In 1999, Mauritania, a member of the Arab League in north-west Africa, established diplomatic relations with Israel - but severed ties in 2010.