The election of Mahmood Ahmadinejad in Iran in June 2005 came to have an enormous impact on Iran’s foreign relations, including Iran’s relations with the Arab states of the Persian Gulf. The present article looks into the state and dynamism of bilateral relations between Iran and the GCC during the 2005-09 period. Placed in the context of the background of relations between the two sides since the 1979 Islamic Revolution in Iran and specifically the 8 years of confidence-building and détente under Khatami, the article discusses the factors that affected these bilateral relations during the period under review. It is argued that such factors as Ahmadinejad’s peculiar foreign policy outlook and discourse, relations with the U.S., diverging postures towards Israel, threat perceptions, Iran’s rising regional stature and influence in the post-2001 period, and also dispute on the three Iranian islands in the Persian Gulf and the name of the waterway, have each affected the state of relations. The review also shows the resilience of economic and trade ties between the two sides beyond the mere political realm and the outstanding issues and disagreements. Considering the inevitable negative impact of the continuing tension and conflict between Iran and the U.S. on the state of relations between Iran and the GCC, the paper emphasizes the imperative of confidence-building measures and policies by all the parties concerned – within the region and beyond. It concludes that any meaningful improvement – and ultimate rapprochement – in the U.S.-Iran relations, even though far-fetched or illusive at the time, would help these relations and the mutually-beneficial establishment of regional security arrangements in the Persian Gulf.