The pact will elevate US aid to Israel from $3.1bn a year currently to $3.8bn, officials say, but the Israelis had to make concessions to secure the money.
The agreement, to be signed on Wednesday, follows 10 months of talks.
It was approved despite frustration within the Obama administration at Israeli settlement building.
The agreement, which replaces a 10-year package set to expire in 2018, "constitutes the single largest pledge of bilateral military assistance in US history", said the state department.
