Defense Minister Ehud Barak approved the purchase of 20 F-35 fighter planes for the Israel Air Force on Sunday.
The planes, manufactured by the American company Lockheed Martin, are expected to be delivered to Israel between 2015 and 2017.
Barak's approval of the $2.7 billion deal came after more than two years of tough talks between the Israeli defense establishment, the U.S. Pentagon, and Lockheed Martin.
The talks were complicated by the IAF's demand to install Israeli systems on the aircraft and the refusal of the Americans to allow those changes.
In the end, the IAF's desire to be the first air force in the Middle East to use the F-35 overcame its demand for the Israeli systems and it agreed to purchase 20 F-35s without the Israeli systems installed.
The Americans have promised, however, that if Israel buys more F-35s, as the IAF intends to do in the coming years, it will be possible to install the Israeli systems on those aircraft.
"The F-35 is the fighter plane of the future that will allow Israel to maintain its aerial superiority and its technological advantage in the region," Barak said. "The F-35 will give the IAF better capabilities, both near and far, to help strengthen Israel's national security."
The Lockheed Martin F-35 is a fifth-generation, single-seat, single-engine, stealth-capable military strike fighter, which can evade radar and anti-aircraft missile systems.
Officials predicted final approval of the deal could be given by the end of September by a panel of Israeli government ministers.
Israel would be the first foreign country to sign an agreement to buy the F-35, or Joint Strike Fighter, outside the eight international partners that have helped to develop the plane.