Israel said the United States on Thursday approved the sale of the Arrow 3 hypersonic missile defense system to Germany, in the country's biggest ever military deal worth $3.5 billion.

The Arrow 3 system, an interceptor designed to shoot down ballistic missiles above the Earth's atmosphere, is jointly developed and produced by Israel and the United States.

Israel's Defense Ministry said in a statement that the U.S. State Department had notified it of the U.S. government's approval for Germany to procure the Arrow 3 system.

The ministry said senior officials from the Israeli and German defense ministries would sign a letter of commitment to the deal with a preliminary payment of $600 million.

"With its exceptional long-range interception capabilities, operating at high altitudes above the atmosphere, (the Arrow 3) stands as the top interceptor of its kind," it said.

"The system employs a hit-to-kill approach for intercepting incoming threats."

Israeli Defense Minister Yoav Gallant, quoted in the statement, called the agreement "the largest in Israel's history."

According to Israeli manufacturer IAI, the Arrow 3 system can intercept ballistic missiles fired from a distance of up to 2,400 kilometers (1,490 miles).

The system was first deployed at an Israeli air force base in 2017 and has been used to protect Israel against attacks from Iran and Syria.

The final contract for the deal is expected to be signed by the end of 2023 after it is approved by the parliaments of Germany and Israel, the Israeli Defense Ministry said.

Berlin expects the Arrow 3 system to be delivered in the final quarter of 2025.

The German government has led a push to bolster NATO's air defenses in Europe after seeing Russia's relentless missile strikes on Ukraine, urging allies to buy deterrence systems together.

More than a dozen European countries have so far signed up to the so-called European Sky Shield initiative.