In an interview with Reuters, Prince Turki al-Faisal, a former ambassador to the United States and Britain and adviser to King Abdullah, said Israel and the Arabs could cooperate in many areas including water, agriculture, science and education.
Asked what message he wanted to send to the Israeli public, he said:
"The Arab world, by the Arab peace initiative, has crossed the Rubicon from hostility towards Israel to peace with Israel and has extended the hand of peace to Israel, and we await the Israelis picking up our hand and joining us in what inevitably will be beneficial for Israel and for the Arab world."
The 22-nation Arab League revived at a Riyadh summit last year a Saudi peace plan first adopted in 2002 offering Israel full normalization of relations in return for full withdrawal from occupied Palestinian, Syrian and Lebanese land.
Israel shunned the offer then, at the height of a violent Palestinian uprising in the West Bank and Gaza Strip.
But it has expressed more interest since the United States launched a new drive for Israeli-Palestinian peace at Annapolis, Maryland, last November, aiming for an agreement this year.
Prince Turki, who was previously head of Saudi intelligence, said that if Israel accepted the Arab League plan and signed a comprehensive peace, "one can imagine the integration of Israel into the Arab geographical entity."
"One can imagine not just economic, political and diplomatic relations between Arabs and Israelis but also issues of education, scientific research, combating mutual threats to the inhabitants of this vast geographic area," he said.
His comments, on the sidelines of a conference on the Middle East and Europe staged by Germany's Bertelsmann Foundation think-tank, were some of the most far-reaching addressed to Israelis by a senior figure from Saudi Arabia.
The desert kingdom, home to Islam's holiest shrines, has no official relations with Israel, although both are key allies of the United States in the region.
"Exchange visits by people of both Israel and the rest of the Arab countries would take place," Prince Turki said.
"We will start thinking of Israelis as Arab Jews rather than
simply as Israelis," he said, noting that many Arabs historically saw Israel as a European entity imposed on Arab land after World War Two.
Prince Turki, brother of Saudi Foreign Minister Prince Saud al-Faisal, holds no official position now but heads the King Faisal Center for Research and Islamic Studies in Riyadh.
He said Israel could expect some benefits on the way to signing a treaty and making a full withdrawal, noting that after the 1993 Oslo interim accords with the Palestine Liberation Organization, regional cooperation had begun and Israel had achieved representation in several Arab states.
Those Israeli advances were reversed after the outbreak of the second Palestinian Intifada in 2000.
Israel was wary of the Arab League plan partly because it would entail handing back the Golan Heights captured in the 1967 Six-Day War, as well as redivision.
But an Israeli participant at the conference, Yossi Alpher, co-editor of the Bitter Lemons Israeli-Palestinian Web site and a former senior intelligence official, welcomed the comments.
"I was delighted to hear Prince Turki's description of the comprehensive nature of normalization as he envisages it within the framework of the Arab peace initiative," Alpher said.
"His remarks should encourage us Israelis and Arabs to deepen and broaden the discussion of ways to reach a comprehensive peace, implement the Arab peace initiative and reach the kind of cooperation that his highness described."
Alpher said he hoped that once there was a comprehensive peace, Israel's Arab neighbours would accept Israelis "as Jewish people living a sovereign life in our historic homeland" and not as "Arab Jews" or "European Jews"