Israel Aerospace Industries signed a $400 million agreement to sell unmanned aerial vehicles to Russia, it announced on Wednesday.
Russian arms maker OPK Oboronprom will buy the UAVs over a period of three years.
An Israeli defense industry source said that under the agreement signed in Israel on Tuesday, the drones would be assembled in Russia.
Russia has been seeking to buy more IAI spy drones after its initial $50 million purchase, announced in April 2009.
"This is a huge step toward deepening cooperation between IAI and Russian industry. This agreement will also strengthen the bilateral relationship between Israel and Russia," the two companies said in the statement.
The UAV deals help improve Israeli ties with Russia, an important country in international efforts to contain Iran's nuclear program.
Oboronprom manufactures helicopter and other aviation technologies.
Russia's war with neighboring Georgia in 2008 exposed an army with largely obsolete equipment and a lack of modern spy drones, defense analysts said.