The US State Department has approved the possible sale of a THAAD anti-missile defence system to Saudi Arabia at an estimated cost of $US15 billion.
The approval opens the way for Saudi Arabia to purchase 44 Terminal High Altitude Area Defence (THAAD) launchers and 360 missiles, as well as fire control stations and radars.
"This sale furthers US national security and foreign policy interests, and supports the long-term security of Saudi Arabia and the Gulf region in the face of Iranian and other regional threats," the Pentagon's Defence Security Cooperation agency said in a statement.
Saudi Arabia and the United States are highly critical of what they consider Iran's aggressive behaviour in the Middle East.
Iran has one of the biggest ballistic missile programs in the Middle East.
The government in Tehran views the missile capability as an essential precautionary defence against the United States and other adversaries, primarily Gulf Arab states and Israel.
THAAD missile systems are deployed to defend against ballistic missile attacks.
The United States deployed THAAD to South Korea this year to guard against North Korea's shorter-range missiles.
That has drawn fierce criticism from China, which says the system's powerful radar can probe deep into its territory.
Saudi-owned al Arabiya television reported on Thursday that the kingdom had also agreed to buy Russian S-400 surface-to-air missile systems, an announcement that came as Saudi King Salman made during his visit to Russia, the first by a Saudi monarch.
US military sales to Saudi Arabia have come under increased scrutiny over the Saudi-led coalition's war in Yemen.
Riyadh and its allies have been bombing the Iran-aligned Houthis in Yemen since the Houthis seized much of the country's north in 2015.
Riyadh says the coalition is fighting terrorists and supporting Yemen's legitimate government but the office of the UN human rights chief has said Saudi-led air strikes cause the majority of civilian casualties.
Lockheed Martin Co is the prime contractor for the THAAD system, with Raytheon Co playing an important role in the system's deployment.