"On behalf of the Saudi people, I declare the donation of one billion dollars for programmes to rebuild Gaza," the Saudi monarch said at the opening session of an Arab summit in Kuwait.
"We have to overcome Arab political differences that led to a division in the Arab ranks which can be exploited by those who want to achieve their regional ambitions" King Abdullah said.
He also warned that the Arab peace initiative "will not remain on the table forever".
Arab leaders are tipped to approve the setting up of a two-billion dollar fund for the reconstruction of Gaza.
Kuwait's ruler Sheikh Sabah al-Ahmad al-Sabah announced at the summit's opening his country will donate all $34 million needed by the UN relief agency for refugees, or UNRWA, for its Gaza Strip relief work.
Qatar last week suggested the setting up of a fund for Gaza and donated $250 million.
The funds follow earlier pledges by UAE President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, and Vice-President and Prime Minister of the UAE and Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum that they will each build 600 houses for displaced Palestinians.
The latest donations came a day after fighting stopped in Gaza between Israel and Hamas, allowing residents to survey the damage from the 22-day war.
Gaza medics said more than 1,300 Palestinians have been killed since the Israeli offensive was launched on December 27. Israel has put its death toll at 13, including 10 soldiers.