The US government has granted Boeing a licence to build communications satellites with India's space agency.
The US wants to explore non-military space co-operation
Kenneth Juster, US Under Secretary for Commerce, made the announcement at a space conference in Bangalore.
The export of some hi-tech equipment to India is restricted by sanctions imposed after it carried out nuclear tests in 1998.
The Indian Space Research Organisation said it plans to build a commercial communications satellite by mid-2006.
"We are discussing with Boeing whether we can incorporate some of their payloads and have joint marketing of the communication satellite," said ISRO chairman G Madhavan Nair.
Wider co-operation on the way?
"It will be built for the global market and should hit the market within two years," he said.
Boeing Satellite Systems had to apply for the licence because US export restrictions apply to ISRO. Many of its subdivisions, including the Satellite Tracking Facility, are individually listed in the restriction orders.
However Mr Juster stressed that the US is keen to see stronger commercial links with India on space technology.
"We need to advance co-operation in high-tech trade, civilian space activities in ways that do not undermine the general international framework on non-proliferation," he said.
The new satellite is expected to be an upgraded version of India's existing INSAT system, which provides communication links for broadcasters, telephone and internet firms.