The United States has given the formal go-ahead for Israel to sell its Phalcon early warning airborne radar system to India.
The radar will be mounted on Russian aircraft
State Department spokesman Philip Reeker said Washington had informed both governments that it had no objection to the $1bn sale.
He said the improving security situation between India and Pakistan made the sale of the radar less likely to destabilise the region.
The deal had been held up for 18 months because of fears it could heighten tension between Delhi and Islamabad.
Pakistan's Foreign Ministry spokesman said the sale would adversely affect the delicate nuclear balance between the two neighbours.
China sale blocked
The Phalcon is a long range warning, control and command system - a more sophisticated version of the US Awacs.
It operates without the latter's trademark rotating dome, increasing the aircraft's manoeuvrability and making it less vulnerable to hostile fire.
The Phalcon system can pick up aircraft hundreds of miles away in any weather - even those flying at low altitudes, by day or night.
It can also intercept and decode enemy radio transmissions.
Correspondents say its purchase is expected to significantly enhance the intelligence gathering and defence capabilities of India's air force.
India and Israel share a growing security relationship.
Three years ago, Israel dropped plans to sell Phalcon-equipped aircraft to China following objections from Washington.