The vision was unveiled by Deputy Crown Prince Mohamed bin Salman in April, but the cabinet's approval means the ambitious changes will be implemented. Aiming to triple non-oil revenues by 2020, diversify the economy and cut state subsidies, the plan is big news for the kingdom.
Here are 7 things you should know about the plan:
1. The plan's goal is ambitious
Tripling non-oil revenues means raising them to 530 billion Saudi riyals ($141.33 billion) by 2020.
2. It will create jobs
By developing industries like mining and tourism, the plan anticipates the creation of some 450,000 new private-sector jobs. This is expected to cost about 270 billion riyals over five years.
3. Less money will be spent on public sector wages
The government plans to cut the amount it spends on public-sector wages from 45 percent of its budget to 40 percent.
4. Taxes will be implemented and subsidies will go down
Indirect taxes will be introduced, but no income tax will be implemented. Subsidies on water and electricity will also be reduced, which is expected to free up as much as 200 billion riyals by 2020.
5. Oil production will be maintained
There will be no cut in oil production, with the kingdom continuing to pump out 12.5 million barrels a day until 2020
6. The kingdom's debt will continue to grow substantially
Saudi Arabia's ratio of debt to gross domestic product is currently at 7 percent but this is expected to widen to 30 percent by 2020.
7. Saudi Aramco will face some changes
Ownership of the state-owned company will be transferred to the kingdom's sovereign wealth fund and a 5 percent share will be sold.