On October 26th 1994, a full peace agreement was signed between Jordan and Israel, bringing peace along Israel's longest border, together with hopes for peaceful relations which would break Israel's geographical isolation and provide more meaningful content than those with Egypt since 1978.

The peace agreement was, on the one hand, a logical conclusion to a developing relationship between the two countries since the conclusion of the Six-Day War in 1967, since which Jordan had refrained from launching war with Israel, remaining neutral in the Yom Kippur War of 1973.

On the other hand, the watershed between a cold peace and an open agreement was the 1991 Gulf War, which crippled Jordan's economy, and the Peace Treaty can be interpreted as economically motivated. Iraq was a powerful neighbour, and Jordan served as its exporter-importer: the international embargo on trade with Iraq was a crushing blow to oil trade passing through Jordan, and therefore to economic stability as a whole. Jordan hoped to benefit through increased trade with Israel, which is perceived as an regional economic super power by the Arab world, and assurances of improved water supply from the Sea of Galilee; in return, she engaged in exchange of agricultural land arrangements and joint development projects for the arid South and their two small souther airports. To a great extent, the initial Principles also reached their final formulation because of the chemistry between Yitzhak Rabin and King Hussein themselves, who had resolved to achieve this goal and intervened personally to finalize the treaty.

Despite the lower than expected economic returns, the loss of King Hussein, and other potential crises (the attempted assassination of Hamas leader Mashal; the Naharayim shooting of 7 Israeli schoolgirls; and an attack on an Israeli school bus by a Jordanian soldier at Netzarim), the peace with Jordan remains probably the warmest relationship Israel has with an Arab country.