Washington, which provides Israel with $2 billion in annual defence aid and is expected to help finance its Gaza withdrawal, had complained that the sale of Harpy attack drones and other advanced technology to China could threaten Taiwan.
The Israeli Defence Ministry said in a statement on Tuesday that it had signed an understanding with the Pentagon "aimed at solving past problems which had seriously harmed relations ... in the realm of technological security".
Israel will take "further steps to fully restore trust" with the US, the ministry added. It did not give details of exactly what had been agreed.
Curbing foreign competition
Tel Aviv denied wrongdoing in the China case, and some Israeli security experts accused Washington of seeking to curb foreign competition to its arms companies.
But US complaints prompted Israel to apologise and reshuffle top defence officials.
A Defence Ministry spokeswoman said the new accord with the Pentagon "covered the entire dispute" but declined to say which of Israel's client countries would be affected.
Israeli officials previously said Washington also had sought oversight on its lucrative defence exports to India.
An Israeli newspaper said in June that, under pressure from the Pentagon, Israel had scrapped a deal to supply China with spare Harpy parts and would impose tighter controls on its arms exports.
The Defence Ministry declined to confirm the report.
The Haaretz daily also said China would likely seek compensation from Israel over its reneging on the long-term Harpy deal and avoid future weapons purchases from the Jewish state.
The dispute played a role in the US decision in April to suspend Israel from involvement in the F-35 Joint Strike Fighter project.
Washington scuppered Israel's multi-billion dollar sale of Phalcon strategic airborne radar systems to China in 2000, citing concerns it could upset the regional balance of power.
Israel has said it will seek $2.2 billion in special US funding to help pay for its withdrawal from the occupied Gaza Strip, which began this week.
Washington sees the pullout as a chance to revive a battered road map to a Palestinian state.