Last year, President Barack Obama’s Administration said the U.S. would continue to support the Arrow project as it has since the beginning of the joint project in 1986. The Arrow is considered one of the most advanced missile defense programs currently in existence.
 

Due to major cuts in the U.S. defense budget, Israel was concerned it would affect the continuance of the joint missile program.
 

Development costs are expected to reach some $100 million and the Arrow 3 will likely become operational in 2012-2013.

The Arrow 3 will be a longer-range version of the Arrow defense system currently in IDF operation. It will be capable of intercepting incoming enemy missiles at higher altitudes and farther away from Israel.
 

Developed by the Israel Aerospace Industry and Boeing, the system has the capability of intercepting ballistic missiles at higher altitudes. The initial test of the Arrow 3 will not include the interception of a mock enemy missile, which is expected to take place in 2012.
 

Inbal Kreis, project manager of the Arrow 3 at IAI told reporters in May, the Arrow system will be able to effectively counter all existing missile threats in the region.
 

Speaking at the New Tech conference in Airport City,  Kreis said the IAI was also modifying the existing Arrow missile launcher to accommodate the slightly smaller Arrow 3 interceptor. This will allow the launcher to also fire American-made SM3 missiles, which are currently used by the U.S. Navy on its Aegis missile defense ships.
 

 She said the missile can alter its trajectory while in the air, which gives it an additional advantage over missiles launched toward Israel.

At the time, Prof.  Yitzhak Ben Yisrael, chairman of the Israel Space Agency reportedly said the Arrow 3 could also serve as an anti-satellite weapon.
 

Sunday’s agreement was signed in Tel Aviv by head of the Defense Ministry’s MAFAT Research and Development Directorate Brig.-Gen. Ofir Shoham and head of the U.S. Missile Defense Agency Lt.-Gen. Patrick O’Reilly.

Israel's defense establishment plans to operate three anti-missile systems: Iron Dome to tackle rockets with a shorter range of up to 60 kilometers; David's Sling - known also as Magic Wand - which has a range of hundreds of kilometers; and  the Arrow 3 ballistic missile defense system designed to shoot down missiles outside the earth's atmosphere.

Once all three systems are operational it will offer Israel a multi tier defense system designed to shoot down an array of threats.

Meanwhile, Defense Minister Ehud Barak left for Washington on Sunday for meetings with top administration officials.  Aside from regional issues, Barak is expected to discuss the purchase of F-35 Joint Strike Fighter jets.