Defense Minister Ehud Barak estimated on Sunday that “Iron Dome” anti-rocket system would be fully functional in two-and-a-half years' time.
The government is expected to invest some NIS 811 million ($207 million) in the system's development in the next five years.
"Iron Dome", which is being developed by RAFAEL Advanced Defense Systems, is capable of intercepting Qassam rockets as well as short-range ground-to-ground missiles currently employed by Palestinian terror groups in Gaza. The system can also intercept short-range Katyusha rockets, which are a part of Hizbullah's arsenal.
Grad missiles have a range of at least 20 kilometers, threatening Ashkelon, Netivot, Ofakim and other nearby communities.
During Sunday's cabinet meeting Barak said the system's development was a "national emergency project", a definition that will help expedite its production. He said the project was part of Israel's multi-tiered approach to defending Israel's airspace from short as well as long-range missiles, which are in Iran's possession.
The "Iron Dome" defense system was selected last February following a series of discussions held by a committee headed by then-Defense Ministry Director-General Gabi Ashkenazi, who is now IDF chief of staff.
Security establishment officials said that as the system is being developed, Israel must also work toward fortifying all communities located within six kilometers of the Gaza Strip.
Last Tuesday the defense establishment conducted a test with a new component of the Patriot system - the 'Yahalom' missile. The test, aimed at examining the various improvements that have been made in the system's operational capabilities, was crowned a success after an extensive review of the experiment results.
Hanan Greenberg contributed to the report