The two victims both were employed by Vinnell Arabia a company based in the U.S. that provides support to the National Guard of Saudi Arabia, said officials.
It was unclear what the motive for the shooting was. A man was taken custody later for exchanging gunfire with security forces.
Officials said the man, who is Abdul Aziz Fahad al-Rashid was not known to have any links with extremist groups.
The shooting, which happened on Tuesday afternoon, took place when the two men from the U.S. stopped their vehicle at a gas station in the eastern section of Riyadh.
Saudi officials announced later the arrest of Rashid, who is reportedly a Saudi national who is 24 and born in the U.S.
The Interior Ministry in Saudi Arabia said that security authorities have not been able to prove any prior ties between Rashid and extremists organizations.
The Saudi embassy in the U.S. located in Washington released a statement that said Rashid was employed previously with the same company as the two victims. He had been dismissed recently by the company because of an issue related to drugs.
The United States Department of State said through a spokesperson that the shooting took place close to the Vinnell Arabia based located in Riyadh.
The contractor who was wounded had only been injured slightly.
The state department statement said they continued to remain in contact with the government of Saudi Arabia to gather the complete details regards the shooting and its motive.
The last killings reported of any Westerners in Saudi Arabia by gunmen was over 7 years ago in 2007. Three French nationals were shot while camping in Saudi’s northwest.