A third of the cost of the new Dolphin 2 class sub was borne by Germany as part of its military aid to the Jewish state.
"INS Tanin is the first Israeli Navy submarine that possesses air-independent propulsion, and is the fourth submarine Israel has acquired," a statement from the military said.
The navy's commander-in-chief, Major General Ram Rutberg, said that acquiring the new vessel means the navy "will double its capabilities, it will be able to reach further and deeper, for a longer period of time, demonstrating force unknown till this day".
According to Israeli military experts, the country's submarines could be used as a second strike capability in case of an Iranian attack using non-conventional weapons.
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The Dolphin submarines, of which the navy already has three, can be equipped with missiles with nuclear warheads.
Israel has never admitted -- or denied -- having a nuclear arsenal, but experts believe it has up to 200 atomic bombs and nuclear-tipped long-range missiles.
Prime Minister Benjamin Netanyahu was in the northern port of Haifa for the submarine's arrival, and said Israel was determined to defend all of its borders, land, air and sea.
"The threats posed by Iran and other Islamist groups oblige us to become stronger," he said.