The Communications and Information Technology Commission's announcement staves off, at least for now, a potential ban of Research in Motion Ltd.'s BlackBerry Messenger service in the country - a step which officials had said was possible because of national security concerns.
It was not immediately clear whether the decision was just a temporary reprieve, or whether the threat to ban the service was off the table.
Saudi's announcement of the possible ban - which came shortly after officials in the United Arab Emirates announced a more sweeping crackdown on the devices due to start in October - was read by many analysts as a reflection of the conservative governments' concerns over an inability to access user data.
Both countries have strict Internet controls. In addition, free speech is sharply curtailed, as much to rein in political dissent as to keep tabs on a tenacious Islamic militancy problem that has both domestic national security and global terrorism implications.
CITC said mobile phone service providers in the country had been given a 48-hour extension ending Monday night to address security concerns, and that progress had been made.
"In light of the positive developments toward addressing some of the organizational requirements ... the commission decided to allow BlackBerry Messenger service to continue," it said in a brief statement.
The commission said it would continue to work with the country's three mobile phone service providers and, based on developments, it would "take the necessary steps."
The regulator did not say if it had reached any final deal with RIM.
Saudi officials had said earlier the company had reached a preliminary agreement with Saudi regulators allowing the government some access to user data.
The plan being discussed involved placing a BlackBerry server in the country, which already has strong controls on the Internet to block morally offensive and political content and maintains strict controls on freedom of expression. A Saudi newspaper reported Monday that testing of the server was under way.
RIM has declined to comment on the state of negotiations, saying it does not disclose discussions with government regulators. But any deal that would allow Saudi officials access to BlackBerry user data could be precedent setting.
"If RIM is required to give wholesale access to one government, they're going to give access to other countries. That's just the way it happens," said Cindy Cohn, legal director and general counsel for digital rights group Electronic Frontier Foundation.
The security concerns cited by the UAE and Saudi Arabia, among other countries, hinge on the way BlackBerry data is sent and managed.
At least some BlackBerry data is encrypted and stored on servers overseas, making it difficult for local governments to monitor.