The SABB HSBC Saudi Arabia Purchasing Managers' Index climbed to 58.9 points on a seasonally adjusted basis in December from 57.0 in November, when it was dragged down by extended public holidays.
A reading above 50 points in the survey of over 400 private companies indicates expansion of business activity, and below 50, contraction.
Output growth rose to 62.6 points in December from 60.2 points in the previous month, while new order growth accelerated to 67.3 from 64.0. New export orders gained at their fastest rate in 17 months.
Employment rose at the fastest rate in three months, while the rate of input price inflation slowed slightly.
Saudi Arabia is enjoying an economic boom on the back of high oil prices and heavy government spending. Gross domestic product grew 6.8 percent last year, according to a preliminary official estimate.