Saudi Arabia will send female athletes to the Olympics for the first time with a judoka and an 800m runner representing the kingdom in London later this month.
Wodjan Ali Seraj Abdulrahim Shahrkhani will compete in the +78kg category in judo.
And teenager Sarah Attar will be the first Saudi women ever to take part at a Games after talks between IOC and the country paid off.
"This is very positive news and we will be delighted to welcome these two athletes in London in a few weeks time," said IOC president Jacques Rogge in a statement.
"The IOC has been working very closely with the Saudi Arabian Olympic Committee and I am pleased to see that our continued dialogue has come to fruition."
Thursday's decision means that every single country competing in the 27 July-12 August Olympics will be represented by male and female athletes.
At the Atlanta Games in 1996, 26 nations failed to send female athletes with the figure gradually going down to just three at the 2008 Beijing Games.
In the past months human rights groups had been urging the IOC to ban Saudi Arabia from the Games if it did not agree to send women athletes.
"The IOC has been striving to ensure a greater gender balance at the Olympic Games, and today's news can be seen as an encouraging evolution," said Rogge.
Female participation in sports has long been a controversial issue in Saudi Arabia, where powerful clerics denounce women for exercising, saying it goes against their nature.
Women in Saudi Arabia are regarded as minors and require the permission of their guardian - father, brother, or husband - to leave the country and in some cases even to work.
Attar, 17, said she was honoured by the prospect of competing for her country at London 2012.
"A big inspiration for participating in the Olympic Games is being one of the first women for Saudi Arabia to be going," said the 17-year-old at her U.S. training base in San Diego, California.
"It's such a huge honour and I hope that it can really make some big strides for women over there to get more involved in sport," she told the official Olympic website (www.olympic.org).
The conservative Muslim kingdom is one of the three countries, alongside Brunei and Qatar, never to have sent female athletes but the latter two confirmed earlier this year that their delegation would include women.
Brunei has entered Maziah Mahusin (athletics), while Qatar has entered Nada Arkaji (swimming), Noor Al-Malki (athletics), Aya Magdy (table tennis) and Bahiya Al-Hamad (shooting), who will also be her country's flagbearer at the opening ceremony.
The IOC said the two Saudi athletes, invited by the IOC, were entered by the Saudi Arabian Olympic Committee by the official deadline of 9 July.
The Saudi decision was welcomed by the British-based Women's Sport and Fitness Foundation (WSFF), a charity campaigning to raise awareness of women's sport.
Chief executive Sue Tibballs said it "represents a real victory for women's sport.
"With more events and more medals up for grabs than ever before we think that London 2012 will be the best Olympic Games for women yet."