The German government has decided to buy the MEADS missile defence system built by European defence group MBDA and Lockheed Martin, instead of the Patriot system made by Raytheon, the defence ministry announced on Tuesday.
German media reports put the value of the contract at several billions of euros.
After long years of deliberation, the German army finally opted for the next-generation Medium Extended Air Defence System (MEADS) made by MBDA, which is a consortium that includes Italy's Finmeccanica SpA, Airbus Group and Britain's BAE Systems Plc, the ministry said in a statement.
It will replace by 2025 the current Patriot system, used by Germany since 1989.
US-based Raytheon had also been in the bidding for the new contract, with an updated version of Patriot.
The number of units that the German army wants to buy was not yet disclosed, but media reports put it at eight or ten.
German news agency DPA said Berlin had already poured four billion euros into the project's development and could invest "three or four billion euros more."
The "Patriot" air defense missile system on December 18, 2012 in Warbelow, northern Germany.
MEADS is a mobile surface-to-air missile system designed to ward off attacks from tactical ballistic missiles and aircraft.
In 2014, developers announced that a MEADS unit had a 360-degree firing arc, and so could successfully deflect simultaneous rocket attacks from different directions.
The choice, taken against a backdrop of budget cutbacks within the army, angered the opposition, with the far-left Linke party slamming it as a "new waste of billions of taxpayers' money," while the environmentalist Green party said the government was "throwing money out of the window."
The decision comes at a time of mounting criticism of the Bundeswehr's faulty and outdated equipment.
Even its standard G36 assault rifle was revealed to have serious technical flaws.
Recent media reports revealed serious problems with several types of aircraft crippling Germany's military abilities at a time when the country is considering greater international engagement.