Contractor Raytheon has been awarded a $297 million Commonwealth contract to revamp Woomera as the world's most advanced military test range.
The Woomera site in outback South Australia takes up an area slightly smaller than England.
The upgraded area, which will see Raytheon double its current Adelaide workforce of 370, will be used to test the F-35 Joint Strike Fighter's performance and made available to the United States military.
Prime Minister Malcolm Turnbull told reporters in Adelaide the decision had been made back in April but not announced until Monday.
"This will make it the most advanced test range in the world," he said at Raytheon Australia's naval and integration headquarters.
Raytheon Australia managing director Michael Ward said his team would manage, design, develop, construct, integrate, test, deliver, install, commission and support the Woomera test range system.
Some of the skills developed in the Air Warfare Destroyer program will be used to deliver the Woomera project.
Mr Ward said his company understood not only the economic and strategic benefits of the site but also its cultural and heritage values.