"They are part of the Gulf Cooperation Council (GCC) force that would guard the government installations," the source said, referring to the six-member bloc that coordinates military and economic policy in the world's top oil-exporting region.
Bahrain said on Monday it had asked the Gulf troops for support in line with a GCC defence pact. The United Arab Emirates has said it would also respond to the call.
Witnesses saw some 150 armoured troop carriers, ambulances, water tankers and jeeps cross into Bahrain via the 25-km (16-mile) causeway and head towards Riffa, a Sunni area that is home to the royal family and military hospital.
Bahrain TV later showed footage it said was of advance units of the joint regional Peninsula Shield forces that had arrived in Bahrain "due to the unfortunate events that are shaking the security of the kingdom and terrorising citizens and residents."
Analysts and diplomats say the largest contingent in any GCC force would come from Saudi Arabia, which is worried about any spillover to restive Shi'ites in its own Eastern Province, the centre of its oil industry.
Bahraini opposition groups including the largest Shi'ite party Wefaq said the move was an attack on defenceless citizens.
"We consider the entry of any soldier or military machinery into the Kingdom of Bahrain's air, sea or land territories a blatant occupation," they said in a statement.
"This real threat about the entry of Saudi and other Gulf forces into Bahrain to confront the defenceless Bahraini people puts the Bahraini people in real danger and threatens them with an undeclared war by armed troops."
The move came after Bahraini police clashed on Sunday with mostly Shi'ite demonstrators in one of the most violent confrontations since troops killed seven protesters last month.
After trying to push back demonstrators for several hours, police backed off and youths built barricades across the highway to the main financial district of the Gulf banking hub.
Those barricades were still up on Monday, with protesters checking cars at the entrance to the Pearl roundabout, the focal point of weeks of protests. On the other side of the same highway, police set up a roadblock preventing any cars moving from the airport towards the financial area.
In areas across Bahrain, vigilantes, some armed with sticks or wearing masks, guarded the entrances to their neighbourhoods.
"We will never leave. This is our country," said Abdullah, a protester, when asked if Saudi troops would stop them. "Why should we be afraid? We are not afraid in our country."
Bahrain has been gripped by its worst unrest since the 1990s after protesters took to the streets last month, inspired by uprisings that toppled the leaders of Egypt and Tunisia.
Thousands are still camped out at the Pearl roundabout, having returned since the army cleared out the area last month.
Washington has urged Bahrain to use restraint and repeated the call to other Gulf nations on Monday.
"We urge our GCC partners to show restraint and respect the rights of the people of Bahrain, and to act in a way that supports dialogue instead of undermining it," White House spokesman Tommy Vietor said.
The cost of insuring Bahraini sovereign debt against default rose further on Monday, approaching 20-month highs after Saudi troops entered Bahrain.
Any intervention by Gulf Arab troops in Bahrain is highly sensitive on the island, where the Shi'ite Muslim majority complains of discrimination by the Sunni Muslim royal family.
Most Gulf Arab ruling families are Sunni and intervention might encourage a response from non-Arab Iran, the main Shi'ite power in the region. Accusations already abound of Iranian backing for Shi'ite activists in Bahrain -- charges they deny.
"Shi'ites in states with large Shi'ite populations, in particular Kuwait and Saudi Arabia, may intensify their own local anti-regime demonstrations," said Ghanem Nuseibeh, partner at consultancy Cornerstone Global.
"The Bahraini unrest could potentially turn into regional sectarian violence that goes beyond the borders of the particular states concerned."
In a sign that the opposition and the royals may find an 11th-hour solution, the opposition groups said they had met the crown prince to discuss the mechanism for national dialogue.
Crown Prince Sheikh Salman al-Khalifa offered assurances on Sunday that dialogue would address key opposition demands including giving parliament more power and reforming government and electoral districts.
Even if talks are successful however, the opposition is increasingly split and hardline groups may keep up protests.
Wefaq is calling for a new government and a constitutional monarchy that vests the judicial, executive and legislative authority with the people. A coalition of much smaller Shi'ite parties are calling for the overthrow of the monarchy -- demands that scare Sunnis who fear this would benefit Iran.
(Additional reporting by Ulf Laessing in Riyadh)