Saudi Arabia, the United Arab Emirates and Bahrain have said they are withdrawing their ambassadors to Qatar because Doha had not implemented an agreement among Gulf Arab countries not to interfere in each others' internal affairs.
The three countries said the move was necessary "to protect their security and stability".
According to a report published by Saudi state media on Wednesday, the decision to withdraw diplomatic envoys was made because Qatar did not implement a security pact about non-interference in the internal affairs of the other states that make up the Gulf Cooperation Council [GCC].
A joint statement from the three countries claimed Qatar failed to commit "to the principles" of the GCC.
A security agreement signed last year by the GCC focused on cooperation in the exchange of information and tracking down of criminals and those who broke the law.
The statement said GCC members had signed an agreement on November 23 not to back "anyone threatening the security and stability of the GCC whether as groups or individuals - via direct security work or through political influence, and not to support hostile media".
GCC foreign ministers had met in Riyadh on Tuesday to try to persuade Qatar to implement the agreement, it said.
"But unfortunately, these efforts did not result in Qatar's agreement to abide by these measures, which prompted the three countries to start what they saw as necessary, to protect their security and stability, by withdrawing their ambassadors from Qatar starting from today, March 5 2013," the statement said.
The move is thought to be unprecedented in the three-decade history of the GCC, a pro-Western alliance of Saudi Arabia, Bahrain, Kuwait, Qatar, UAE and Oman.
Shortly after the statement was released, Qatar's stock market took a dive, with the bourse dropping 3 percent.