The deal involves Lockheed's Terminal High Altitude Area Defense (THAAD) missile defence system that is designed to intercept ballistic missiles in midair, according to the Pentagon's daily digest of major weapons contracts.
The contract reflects growing confidence and demand for the missile defence system, said Riki Ellison, founder of the non-profit Missile Defense Advocacy Alliance.
The deal, which has been in negotiation for several years, will combine orders for the United States and UAE, generating savings for the United States of about 10 percent, said Mat Joyce, Lockheed vice president and THAAD program manager.
It includes 192 interceptors for the UAE and up to 110 interceptors for the U.S. Army, including an option for fiscal 2014 that is valued at $352 million, to be exercised no later than December 31, according to the Pentagon announcement.
Joyce said the option would allow the U.S. government to benefit from the lower pricing at a time when it is facing likely additional reductions in the U.S. defence budget.
The United States is in talks with Qatar on a possible sale of the THAAD missile defence system.
Saudi Arabia, Japan and South Korea have also expressed interest, Joyce said.
The U.S. Missile Defense Agency last week conducted the first operational test of the THAAD system and its ability to work together with the Aegis combat system on a guided-missile destroyer. Working together, the two systems intercepted two medium-range ballistic missile that were fired nearly simultaneously.
Earlier this year, after North Korea threatened to launch a nuclear attack on the United States, the Pentagon moved two Aegis destroyers to the western Pacific and a THAAD missile system to its Pacific territory of Guam.
(Reporting by Patrick Rucker and Andrea Shala-Esa; Editing by Eric Beech and Ron Popeski)