Israeli and US defence officials on Wednesday carried out an advanced test of a new system against short-range missiles, the defence ministry said.
The defence agencies of both states "completed a successful intercept test of the David's Sling Weapon System against a short-range ballistic missile today," it said in a statement.
A year ago the David's Sling interceptor was successfully tested, according to the statement.
But an Israeli official said on Wednesday this was the first time David's Sling was tested "in its entirety", including identifying the target missile, launching the projectile and successfully shooting the target down.
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The first test took place in November 2012, days after a truce brought an end to eight days of fighting between Israel and Palestinian militants in Gaza during which over 1,000 rockets, much of them Grads, were fired at the Jewish state.
Many of the rockets were intercepted by the Iron Dome short-range defence system.
The Arrow, a cutting-edge system designed to counter long-range missiles, has successfully intercepted missiles comparable to Iran's Shihab-3 in a variety of test conditions.
David's Sling was aimed at bridging the gap between the Arrow and Iron Dome, with the official stating it was aimed at intercepting projectiles "from Grad to Scud", the latter referring to the long-range missiles fired by Iraq at Israel during the 1991 Gulf War.
The official refused to say when the new system, which was being developed by Israel's Rafael Advanced Defence Systems and US company Raytheon, might become operational.