The Gulf kingdom of Bahrain severed diplomatic ties with Iran on Monday, hours after neighbouring Saudi Arabia broke off relations with Tehran.
The Bahraini government charged Iran with "blatant and dangerous interference" in the internal affairs of Arab countries and support for terrorism.
Sectarian tensions in the region have escalated following the execution of prominent Saudi Shiite dissident Sheikh Nimr al-Nimr.
The Shiite cleric was among 47 people executed by Saudi Arabia on Saturday after their convictions on terrorism-related charges.
Bahrain has ordered Iranian diplomats to leave its territory within 48 hours, the official Bahrain News Agency said on Twitter.
Manama also condemned the Saturday night attack by protesters on the Saudi embassy in Tehran.
Bahrain, whose Sunni ruling family is closely allied to Saudi Arabia, has seen two days of protests by members of its Shiite majority since al-Nimr's execution.
There have been reports of unrest in the eastern Saudi Arabian governorate of Qatif, al-Nimr's home region and a stronghold of the country's restive Shiite minority.
A civilian was killed and an 8-year-old injured when gunmen opened fire on police in the cleric's hometown of Awwamiyeh, police said Monday.
The incident took place as security forces were trying to recover a stolen vehicle, a police statement said.
Awwamiyeh and neighbouring Qatif city have seen frequent protests in recent years.
Al-Nimr was sentenced to death in 2014 on charges of causing sectarian strife and disobeying the ruler.
The trial was condemned as unfair by human rights groups and his supporters say he had only called for peaceful protests and criticized the ruling Al Saud family.
The execution has provoked a furious reaction from Shiite Muslims in the region. Iran's Supreme Leader Ayatollah Ali Khamenei threatened regional rival Saudi Arabia with "divine vengeance" for executing al-Nimr.