The joint maneuvers, scheduled for October, will undoubtedly mean greater joint development of advanced systems like Israel Aerospace Industries' Arrow-3 project designed to shoot down ballistic missiles outside Earth's atmosphere that's now under way between state-owned IAI and the U.S. Boeing Co.
Arrow 3, which will, constitute the top layer of a four-tier missile defense shield, is scheduled to undergo its first test by the end of the year.
The common factor in this exercise, as with the companion Juniper Cobra series of maneuvers, is testing both nations' defenses against ballistic missiles in a coalition scenario.
In this case, that means countering Iran which both the U.S. administration and Israel are convinced is on its way to developing a nuclear weapon and nuclear warheads for its growing force Shehab-3 ballistic missiles and the more advanced, longer range Sejjil-2 now under development.
This commonality also has a political aspect, demonstrating to adversaries in the region, such as Iran and possibly Syria and even the democracies struggling to be born across the Arab world, that the Americans and Israel stand together.
That's hardly a new concept as far as the Middle East's concerned.
But the growing partnership in developing missile defense systems, which is most cases means U.S. funding for Israeli projects that the Americans need to counter the threats they face points to a level not only of development but also operational deployment that has not been seen before.
This has been largely driven by Israel's allies in the U.S. Congress, both Republicans and Democrats, and by the powerful American Israel Public Affairs Committee.
U.S. President Barack Obama has endorsed these efforts, in part, at least, because he faces a tough re-election campaign. But merging Israel and U.S. missile projects provides a boost for the U.S. defense industry at a time of shrinking military budgets.
Austere Challenge will be the largest joint exercise aimed at seeing how these defense systems, from the currently deployed high-altitude Arrow-2 developed by IAI to the short-range Iron Dome developed by Rafael Advanced Defense Systems, work in a simulated Iranian attack.
The United States will deploy its ship-based Aegis Ballistic Missile Defense System, developed by Lockheed Martin, which successfully carried out a test intercept in June, and Raytheon's PAC-3 Patriot.
These would act as safety nets if the top-tier systems do not intercept ballistic threats.
The Americans will also deploy its Terminal High Altitude Area Defense system, the U.S. Army's version of Aegis.
THAAD, designed and produced by Lockheed Martin with key subcontractors like Raytheon, Boeing and BAE Systems, is designed to intercept ballistic missiles, but has limited capability against intercontinental ballistic missiles.
Apart from U.S. involvement in developing Arrow-3 and Iron Dome, Raytheon is working with Rafael to develop David's Sling, which is intended to counter medium-range missiles between the other two systems.
Because of major defense budget cuts for fiscal 2012-13, the Israelis have become increasingly dependent on U.S. funding for missile development.
In recent weeks, the U.S. Congress has approved aid of nearly $1 billion, spread over several years, for Israeli missile programs, particularly Arrow-3. That's on top of the $3 billion a year in U.S. military Israel gets.
The Arrow program, including a planned Arrow-4 variant, will get around $112 million, David's Sling nearly $150 million.
The Jerusalem Post recently reported Israel is keen to develop a multiyear plan with the Pentagon that "would ensure a regular budget for missile defense systems that Israel will need to purchase over the coming years."
As the Persian Gulf confrontation over Tehran's alleged drive for nuclear weapons escalates, Austere Challenge 12 assumes a more profound geopolitical dimension.
But the growing links between U.S. and Israeli defense industries on missile defense reflects a recent surge in U.S. moves to embrace Israeli technological advances that could play a key role in developing an enhanced first line of defense for the Americans against future Iranian missile threats.
On May 9, the U.S. House of Representatives approved the United States-Israel Enhanced Security Cooperation Act of 2012 to, among other things, "expand military and civilian cooperation." The Senate endorsed it Friday.