He also approved $1bn for the Central Bank of Lebanon to support the economy.
The Saudi monarch warned that Israel’s military offensives in Lebanon and Gaza could ignite a war in the region.
He has held talks with Egypt’s President Hosni Mubarak in the Saudi capital Riyadh ahead of a conference on Lebanon in Rome on Wednesday.
Pressure on the Lebanese pound has risen over the past fortnight during the military action by Israel in response to Hezbollah’s capture of two Israeli soldiers in a cross-border attack.
Lebanon billions adrift
Experts estimate the damage to the Lebanese economy at around $2bn, with investors and tourists fleeing, and believe that the government is set to lose out on $600m in earnings.
Saudi Arabia has been a major backer of Lebanon since the 1975-1990 civil war was ended with a peace deal in the Saudi town of Taif.
If the peace option fails because of Israeli arrogance, there will be no other option but war
The king has coupled his aid promises with unusually forthright comments about the crisis.
“Saudi Arabia warns everybody that if the peace option fails because of Israeli arrogance, there will be no other option but war,” he was quoted as saying by state media.
Saudi Arabia and Egypt have called for an immediate halt to the Israeli offensive but have also blamed Hezbollah for starting the fighting.
That criticism sparked a wave of anger in the Arab world.
The BBC’s Magdi Abelhadi in Cairo says there is a fear that the scale of Lebanese casualties is being used by radical opposition groups across the region to mobilise public opinion against moderate leaders like King Abdullah and President Mubarak.
The Saudi government is also to give $250m to the Palestinians, who are suffering the effects of an Israeli onslaught following the capture of an Israeli soldier by Gaza-based militants.
The Saudi aid pledges come after the UN on Monday launched a $150m (Â£81m) aid appeal for Lebanon.
The Urn’s top humanitarian official, Jan England, said the money was needed to help feed and shelter about 800,000 civilians caught up in the conflict.
The US has announced a $30m package to ease the suffering of civilians.
The EU has already pledged $12.6m in aid.