The United States and Israel on Wednesday signed a crucial deal under which Washington will give Israel $38 billion in military assistance over the next decade, the largest military aid package in US history.
The $38-bilion aid will allow Israel, America's main ally in the Middle East, to upgrade its defences with new fleet of fighter aircraft, a more agile ground force and a stronger missile shield, senior US officials said.
The deal was struck after nearly 10 months of negotiations after last year's US-led nuclear deal with Iran, Israel's main enemy.
Israel considers the nuclear deal with Iran as inimical to its interests and has caused friction between Prime Minister Netanyahu and President Barack Obama and the $38-billion arms deal is intended to placate Tel Aviv with assurance of boosted defences.
The package, however, comes with strings attached. It obliges Israel to phase out a special arrangement that has allowed Israel to spend part of US aid on its own defence industry instead of buying American-made weapons.
Israel has also promised not to seek additional funds from Congress beyond what will be guaranteed annually in the new package.
Netanyahu opted to strike a new pact with Obama and to give Israel's defence establishment the ability to plan ahead amidst uncertainties on whether Democrat Hillary Clinton or Republican Donald Trump win the next Presidntial election in US.
The Obama administration also wanted to appear not so opposed to Netanyahu's policies and ward off Republican criticism of not being attentive enough to Israel's security.
The $38-billion deal come into effect after the current $30 billion MoU signed in 2007 expires in 2018 and will cover US fiscal years 2019 to 2028.
"Prime Minister Netanyahu and I are confident that the new MOU will make a significant contribution to Israel's security in what remains a dangerous neighbourhood," Obama said in a written statement.
The agreement was signed at the State Department by US undersecretary of state Thomas Shannon and Jacob Nagel, acting head of Netanyahu's national security council.