King Salman initiated wide-ranging shake-ups via royal decrees late Saturday, including the appointment of one of his sons as Saudi Arabia's new ambassador to Washington.
Read more: War In Yemen: Saudi Fighter Pilots Get 60 Percent Pay Hike
Prince Khaled bin Salman, a US-trained F-15 pilot, replaces Prince Abdullah bin Faisal bin Turki. He had been "removed" after serving just one year, said the Saudi Press Agency.
Longstanding oil supply-based ties between Gulf states and the US became frayed during the past Obama administration.
Saudi Arabia was visited in the past week by Jim Mattis, the new US defense secretary under President Donald Trump who in January denounced the "harmful influence" of Iran, Saudi Arabia's rival neighbor.
Ministers, army head replaced
King Salman in his decree also fired his civil service minister Khaled al-Araj, information minister Adel al-Turaifi and technology minister Mohammed al-Suwaiyel.
Late last year, the Arab News reported that Araj was under investigation by the kingdom's anti-corruption commission for the alleged "irregular hiring" of his son.
The king also appointed Fahad Bin Turki to replace Lieutenant General Eid al-Shalwi as head of the Saudi army.
Two years ago, Saudi Arabia alongside Gulf nations such as Qatar began a campaign again Houthi rebels in Yemen, described by some analysts as a "quagmire." The US provides logistical and intelligence support for that Saudi-led coalition.
Pay levels restored
In a key move, King Salman restored financial allowances for civil servants and military personnel slashed 20 percent last September as the kingdom sought to save money at a time of low oil prices.
The recommendation to reinstate pay levels had come from the second-in-line to the throne, Deputy Crown Prince Mohammed bin Salman, another of the king's sons and also defense minister, who leads a drive to diversify the economy called "Vision 2030."
Read more: Oil Prices Stabilize As Saudi Arabia, Kuwait Signal Likely Extension Of Oil Output Cut
A Saudi government spokesman cited better-than-expected budgetary figures in the first quarter of 2017, saying a "strong improvement" justified the pay reinstatement.
"The royal order returns all allowances, financial benefits, and bonuses to civil servants and military staff," said state-run Ekhbariya TV.
Government employees make up about two-thirds of working Saudis.
Last Thursday, the Saudi labor ministry announced that foreigners would no longer be allowed to work in Saudi Arabia's numerous shopping malls.
Only Saudi men and women would work in malls across the kingdom, the ministry said in a Twitter message.
About nine million foreigners work in the kingdom, according to latest available figures from 2015, ranging from street cleaning, waiting on tables and providing management expertise.
Bloomberg News said from July the Saudi government planned to impose a levy on foreign workers with dependents.
Read more: Saudi Arabia Blocks Foreigners From Working In Malls
The Jadwa Investment firm, citing third quarter 2016 figures, said the unemployment rate for Saudi women was 34.5 percent.
For Saudi males it was 5.7 percent, Jadwa said. Saudis typically favor jobs in the public sector, where hours are shorter.
A further decree issued late Saturday named Ibrahim al-Omar as governor of the Saudi Arabian General Investment Authority (SAGIA), an agency that manages Saudi Arabia's foreign investments.
King Salman toured Asia in March that included visits to Indonesia, Malaysia, Japan and China, and resulted in trade and investment deals.