Saudi Arabia is to buy 72 Eurofighter Typhoon jets BAE Systems, the Ministry of Defence (MoD) has confirmed.
The deal is worth about £4.4bn but contracts for maintenance and training are expected to take the bill to £20bn.
The Serious Fraud Office (SFO) dropped a probe last year into a sale of jets to the Saudis in the 1980s.
The UK government said this was on national security grounds, but reports said the Saudis had threatened to pull out if the probe went ahead.
Blackmail claim
The official Saudi news agency SPA says that the price paid per aircraft is the same that Britain's Royal Air Force pays for the aircraft.
UK-based BAE Systems said it welcomed "this important milestone in its strategy to continue to develop Saudi Arabia as a key home market with substantial employment and investment in future in-Kingdom industrial capability".
Critics attacked the decision to drop the SFO investigation, saying the government had put commercial interest before ethics and had given in to Saudi blackmail.
In addition to the price paid for the planes, there is also expected to be a lucrative deal for the munitions that go with them.
The negotiations had been overshadowed by a UK inquiry into allegations Saudi Arabia took bribes from BAE under a military-plane deal struck between the two nations two decades ago.
Britain's Serious Fraud Office last year investigated BAE Systems' £43bn Al-Yamamah deal in 1985, which provided Hawk and Tornado jets plus other military equipment to Saudi Arabia.
However the investigation was pulled by the British government in December 2006 in a move supported by then-prime minister Tony Blair amid statements about the UK's national interests.
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