The move follows Israeli Foreign Minister Yair Lapid's visit to the UAE this week to inaugurate the country's first Gulf embassy in the Emirati capital Abu Dhabi.
The airlines said in a statement they had "launched their joint codeshare network and reciprocal loyalty agreement for frequent flyers".
"This builds on the Memorandum of Understanding (MOU) the airlines signed in 2020 following the Abraham Accords signed by the UAE and Israel," it added.
Under the agreement, El Al will sell tickets and offer frequent flier points to its members for the twice-weekly Etihad service between Abu Dhabi and Tel Aviv from July 18.
Pending regulatory approval, Etihad will then begin to sell tickets for 14 routes operated by El Al as well as offering benefits to its frequent fliers.
"We are very pleased to be able to announce the launch of our codeshare and frequent flyer partnership with El Al," said Etihad chief executive Tony Douglas.
From oil to tourism to cutting-edge technologies, the two countries hope to benefit from an economic dividend following the normalisation agreement.
