The designation is the latest step taken by Gulf states against Hezbollah as ties between its main backer Iran and regional powerhouse Saudi Arabia deteriorate.
The six-member Gulf Cooperation Council "decided to consider the militias (of Hezbollah) a terrorist organisation", GCC Secretary General Abdullatif al-Zayani said in a statement.
He said the states targeted Hezbollah because of "hostile actions of the militia who recruit the young people (of the Gulf)".
Zayani cited "their terrorist acts and incitement in Syria, Yemen and in Iraq", which he said were threatening Arab security.
Saudi Arabia last month halted a $3 billion programme for military supplies to Lebanon in protest against Hezbollah, which has lawmakers in Beirut's parliament.
Announcing the funding cut, a Saudi official said the kingdom noticed "hostile Lebanese positions resulting from the stranglehold of Hezbollah on the state".
He specifically cited Lebanon's refusal to join the Arab League and the Organisation of Islamic Cooperation in condemning attacks on Saudi diplomatic missions in Iran in January.
Riyadh cut diplomatic ties with Tehran after demonstrators burned its embassy and a consulate following the Saudi execution of a prominent Shiite cleric.
The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Last week Saudi Arabia urged its nationals to leave Lebanon and avoid travelling there.
Qatar and Kuwait followed with similar travel advisories, while the United Arab Emirates banned its nationals from travel to Lebanon.
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String of sanctions
Gulf monarchies had already sanctioned Hezbollah in 2013 in reprisal for its armed intervention in Syria.
Last week Riyadh upped measures against the group, freezing assets and prohibiting dealings with three Lebanese nationals and four companies.
Saudi Arabia and Qatar back rebels opposed to Syria's government, whereas Hezbollah is fighting in support of President Bashar al-Assad.
Syria's war has also exacerbated political rivalries within Lebanon, which has been without a president for almost two years because of fierce disagreements between Hezbollah and its rivals.
Hezbollah chief Hassan Nasrallah on Tuesday called on Saudi Arabia not to collectively punish Lebanon's people just because Riyadh disagreed with his group's policies.
In a televised address, Nasrallah said Saudi Arabia does not have "the right to sanction the Lebanese people because one particular party took a certain position".
Nasrallah pledged Hezbollah would continue to speak out against what it saw as Saudi aggression in the region.
Mustafa Alani, of the independent Gulf Research Centre, said the GCC designation should make it easier to take further measures against Hezbollah.
"You need to fight this sort of organisation," he said.
Yemen's government last month accused the group of sending fighters to aid Iran-backed Huthi rebels, which a Saudi-led regional coalition is battling.
In January, Bahrain said it had dismantled a "terror" cell allegedly linked to Iran's Revolutionary Guards and Hezbollah.
That same month, a lower court in Kuwait sentenced 22 people, all but one of them Kuwaiti Shiites, who were charged with spying for Iran and plotting Hezbollah-linked attacks in the Gulf country.
And a United Nations-backed special tribunal is trying five Hezbollah members in absentia for the 2005 assassination of former Lebanese prime minister Rafiq Hariri.