The German government has approved the sale of three Thyssenkrupp submarines to Israel and will provide financial support for the purchase, government spokesman Steffen Seibert told a regular news conference on Monday.
The estimated $2 billion deal is under police investigation in Israel over suspected corruption and several public officials and private citizens have been questioned in the case.
The 2016 deal has been under public scrutiny since it emerged that Prime Minister Benjamin Netanyahu's personal lawyer also represented Thyssenkrup Marine System's local agent, raising concerns of a conflict of interest.
The attorney has denied wrongdoing and said he never discussed the deal with Netanyahu. Israel's justice ministry said in February that Netanyahu himself was not a suspect.
Seibert said Germany would make a contribution of up to 540 million euros to help finance Israel's purchase.
Seibert said an inter-governmental memorandum of understanding approving the deal would be signed later on Monday.