This paper has two purposes. The first one is to explain the rivalry between Iran and Saudi Arabia by analyzing four cases which has brought about and consolidated their power struggle. This gives the reader a historic background of the two countries relations, underlying reasons for their rivalry and a greater picture of their interests in the Middle East. It also leads up to the second purpose, which is to in depth examine Iran and Saudi Arabia’s foreign policy in Yemen, the latest conflict between the two countries. The papers research design is a qualitative case study with realism as its theoretical framework. The paper concludes that the Iranian revolution set off the rivalry due to Iran’s willingness to export its revolution and its Shia ideology to neighboring countries in the region. Saudi Arabia’s support to Iraq during the Iran-Iraq War helped contain Iran’s hegemonic ambitions and made Saudi Arabia the most dominant power in the Middle East. In Syria, Iran has a lot at stake if the regime falls, which is why Saudi Arabia is trying to topple Bashar Al-Assad. The execution of Nimr al-Nimr further deteriorated tensions between Iran and Saudi Arabia. in Yemen, Iran seeks to expand its power to the Arabian Peninsula, whereas Saudi Arabia seeks to push out Iranian influence and regain its dominance.