Defense establishment officials expressed their discomfort over the American decision not to launch the missile. The Israelis estimated that the Americans took extra precautions and that the missile could have been launched despite the malfunction.
The test was postponed three times throughout the week due to weather problems and malfunctions.
The Defense Ministry said in response that "after the target was launched, the Arrow weapon system went into action. The radar spotted the target and transferred its data to the shooting management center, which calculated a defense plans against it. Not all the conditions for launching the Arrow interceptor were met and therefore the interceptor was not launched."
In a test involving three US missile interceptors, Arrow tracked a target missile dropped from a C-17 aircraft, the Pentagon said in a statement. The Israeli system also exchanged data on the target in real-time with elements of the US missile defense system, the statement said.
"Not all test conditions to launch the Arrow Interceptor were met and it was not launched," the Pentagon said.
Other objectives were achieved and the results were being analyzed, it said.
Upgrades to Arrow, which has already been deployed at two sites in Israel, are widely seen as part of US efforts to persuade the Israelis not to attack their enemy preemptively while the Obama administration pursues diplomacy with Tehran.
Hanan Greenberg contributed to this report