This handout file photo released on December 10, 2015 by the Israeli Defence Ministry shows the launch of an Israeli Arrow 3 missile, at an undisclosed location in southern Tel Aviv. AFP
The long-range Arrow 3 system, designed to shoot down missiles above the Earth's atmosphere, is powerful enough to offer protective cover for neighbouring European Union states.
Finance and defence ministry documents seen by AFP show that the government has asked the budget committee in the lower of house of parliament, which will meet on Wednesday, to greenlight an advance payment of 560 million euros for the deterrence system.
The Arrow 3 system is expected to cost up to 3.99 billion euros in total, the documents say, a billion euros more than initially estimated.
The money will come from a landmark 100-billion-euro fund unveiled by Chancellor Olaf Scholz to bolster the country's defences in the wake of Russia's invasion of Ukraine.
The announcement marked a major turnaround for Germany after years of under-investment in the armed forces.
If the deal goes ahead as planned, Berlin expects the Arrow 3 system to be delivered in the final quarter of 2025.
The German government has led a push to bolster NATO's air defences in Europe after seeing Russia's relentless missile strikes on Ukraine, urging allies to buy deterrence systems together.
More than a dozen European countries have so far signed up to the so-called European Sky Shield initiative to help protect the skies over NATO.
Germany believes the Israeli-made Arrow 3 has a key role to play in those efforts.
According to Bild newspaper, the corresponding radar system would be installed in three sites in Germany, and their monitoring data then transmitted to a central site where soldiers would be watching for threats 24/7.
If a rocket attack were uncovered, an Arrow 3 would be sent up to intercept the missile in space, destroying it there.
The radar system is so powerful it can provide cover for Poland, Romania and the Baltic nations, said Bild.