The five countries announced they would withdraw their diplomatic staff from Qatar, and also that they were closing their airspace and borders severing land, sea and air contact with Qatar within the next 24 hours.
All the nations also said they planned to cut air and sea traffic.
The official Saudi state news agency said early on Monday that diplomatic and consular relations had been severed with Qatar "proceeding from the exercise of its sovereign right guaranteed by worldwide law and the protection of national security from the dangers of terrorism and extremism".
Qatar's Foreign Ministry on Monday said that the country regrets the decision of Saudi Arabia, Bahrain, the United Arab Emirates' and Egypt to cut off diplomatic ties with it.
The middle-east nation is also set to host the 2022 Football World Cup.
The Abu Dhabi-based airline Etihad says it is suspending flights to Qatar amid a growing diplomatic rift.
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Egypt has given the Qatari Ambassador 48 hours to leave the country, though it has made no statement regarding its nationals in Qatar or Qatari nationals in Egypt.
While Dubai-based Emirates and Qatar Airways are yet to confirm their plans, there was reportedly chaos in the Doha airport on Monday. Qatar later said the statements, which were posted on the state news agency, were fake and that the agency's website had been hacked.
The UAE and Saudi Arabia accuse Iran of funding and arming Shiite Houthi rebels in war-torn Yemen, where a Saudi-led pan-Arab military coalition has been fighting the Houthis in favor of the legitimate government of Abdu-Rabbu Mansour Hadi since March 2015.
Media reports indicated that all UAE airlines, including budget flyer FlyDubai and Etihad from Abu Dhabi, will stop flying to Qatar from Tuesday.
Egypt, which is not part of the GCC, claimed that the Qataris had taken an anti-Egyptian course and that its efforts to discourage support for terrorism from Doha had failed, leaving this as the necessary move.
Qatar is also one of the major supporters of the Hamas government in Gaza, Palestine.