Australian troops will be shielded by a brand new $2 billion missile protection system by the early 2020s.
Defence Industry Minister Christopher Pyne said the purchase would replace a 30-year-old system and will be operated by the Army's 16th Air Land Regiment.
"It's essentially employed to protect personnel in theatre, who are out in operations," he told reporters in Adelaide.
Raytheon Australia will develop the system, and there will be opportunities for other Australian defence industry firms to get involved.
Mr Pyne said Canberra-based CEA Technologies, which produces phased array radar for Australia's Anzac-class frigates, and Thales Australia's Bendigo-made Hawkei protected mobility vehicles may be part of the project.
Mr Pyne said it could be used to protect Australian bases in war zones or northern Australia.
The system will have a range of 15-20km.
It will cost $1 billion to sustain and maintain the system once it is up and running.
Defence will complete a detailed analysis before returning to the federal government for final consideration in 2019.
Raytheon Australia managing director Michael Ward said the company would combine US and Norwegian technology and Australian innovation.
