The US removes its restriction on supplying military equipment to Egypt, which was imposed when the military took power in Cairo nearly two years ago.
The White House said President Barack Obama was freeing up military exports and making other changes to military ties with Egypt, a long-time US ally, to support US interests while also encouraging Egypt’s political reforms.
Lifting the ban will allow the transfer of equipment already paid for, including 12 Lockheed Martin F-16 aircraft, 20 Boeing Harpoon missiles, and up to 125 M1A1 Abrams tank kits made by General Dynamics, a National Security Council spokesperson said.
The decision was announced after a phone call between Mr Obama and Egyptian President Abdel Fattah al-Sisi in which they also discussed the turmoil that is gripping the region.
Egypt has worked with the US on Middle East peace moves and is emerging from a period of domestic upheaval.
It is also engaged in several regional conflicts, including in neighboring Libya, and fighting Islamic State militants at home.
Mr Sisi is leading an initiative to form a unified Arab military force in the region to confront Iranian-allied rebels in Yemen alongside other threats.
The White House said Washington would “modernise” the way it supplies military aid to Cairo to focus on counterterrorism, border security, maritime security and Sinai security, where Islamic State militants have been active.
Mr Obama told Egypt’s president he would continue to ask the US Congress for military aid totalling $1.3bn for Egypt annually.
But he said the US would stop allowing Egypt to buy equipment on credit starting in fiscal year 2018.
Egypt has been the second-largest recipient of US foreign aid since its peace treaty with Israel in 1979.
Aid was frozen after the Egyptian army overthrew former President Mohamed Mursi. Mr Obama resisted calling that a coup because it would have resulted in aid being cut completely.
Some restrictions were relaxed last year, but Congress made aid dependent on the US Secretary of State certifying that Egypt was taking certain steps to govern democratically, a delay which angered the Egyptian government.
Secretary of State John Kerry is expected to tell Congress within the next two weeks that the aid is in the US national security interest, even though he will not make the “democracy certification”, a senior administration official said.