"We know that there is a perception held by too many Pakistanis that America's commitment to them begins and ends with security," Clinton said. "But security is just one piece of this vital partnership."
Dams and hospitals
Electricity is one of Pakistan's top priorities. A large chunk of the new US aid will be spent on new power supplies, including the Gomal Zam dam in Pakistan's Khyber-Pakhtunkhwa province, and several hydroelectric projects in Balochistan province.
Clinton said the US would also fund several solar and wind energy projects.
Pakistan's electric grid is chronically overtaxed, with hours-long blackouts common across the country. The Pakistan Electric Power Company reported earlier this week that demand for electricity outstripped supply by nearly 5,000 megawatts.
US aid will also be used to renovate three hospitals, in Karachi, Lahore and Jacobabad, to launch several agricultural programmes, and to expand access to clean water in Pakistan.
Shah Mehmood Qureshi, the Pakistani foreign minister, said the aid package would bring important benefits for Pakistan.
"This relationship is beyond security," Qureshi said. "This is a relationship that improves our purchasing power, our quality of life."
The Haqqani network
But security concerns remain a fundamental part of the US-Pakistan relationship.
Clinton confirmed that the US plans to designate the so-called Haqqani network as a "foreign terrorist organisation." The network is based in Pakistan, and considered the deadliest threat to US and Nato forces in Afghanistan.
Pakistan's intelligence services have long been accused of having close links to the Haqqani network. Qureshi declined to comment directly on the US plan to act against the group.
"The US wants Pakistan to disassociate itself from the Haqqani group, and to the extent that it can and it will, to go after [them]," Mosharraf Zaidi, a Pakistani journalist, told Al Jazeera. "But there is a very wide gulf between the two countries on this issue."
Monday's "strategic dialogue" follows Clinton's meetings on Sunday with Asif Ali Zardari, the Pakistani president, and Yousuf Raza Gilani, the prime minister. Clinton also attended the signing ceremony for an Afghan-Pakistan transit agreement, which will allow Afghan goods bound for India to travel through Pakistan.
After leaving Islamabad, Clinton will travel to Kabul, where donors will meet on Tuesday for the ninth international conference on Afghanistan in nine years.