Sources familiar with the negotiations say the program, worth some $450 million to Israeli defense contractors, is expected to expedite finalization of the contract signed in October 2010 for the initial batch of JSFs, enough for one squadron.
That's important for Israel because it badly wants the fifth-generation fighter, considered the most advanced combat jet in the world, to form the spearhead of its strategic air power.
Initially, the Israeli air force's primary concern was conducting long-range strikes against Iran's nuclear infrastructure. But with the Arab world convulsed by revolutions and political turmoil over the last 18 months, it's taking a wider view of strategic threats.
The Israelis have been pressing the Pentagon and Lockheed to allow them to install their own electronic equipment, including electronic countermeasures, command systems, radios and datalinks, to integrate Israel-made weapons systems into the F-35s they buy.
They usually insist on that and got their way with their fleets of Boeing F-15Is and Lockheed Martin F-16Is.
But on this project, with various versions of the F-35 due to equip the U.S. Air Force, Navy and Marine Corps, the Americans have been more reluctant than usual to give the Israelis access to the F-35's software code that is required to integrate non-U.S. systems.
However, given the plethora of problems and cost overruns that have plagued the F-35 project and set it back at least two years, an Israeli purchase of the jet, which could eventually run to 75 planes, will provide a vote of confidence in the project and hopefully spur sales.
And there's always the prospect of more F-35s for the Israeli air force. The stealth jet is to replace Israel's 340-plus F-16s and F-15s in the coming years and this initial order puts the F-35 in a strong position.
Meantime, the Eurofighter Typhoon is seen as a challenger, and Boeing is spending private money to develop a stealth-enhanced F-15SE Silent Eagle, with many of the F-35s capabilities plus a wider range of integrated weapons. It's likely to cost less, too.
Israel isn't among the nine U.S. allies, such as Italy, Britain and Singapore, which joined the F-35 program at its launch and agreed to buy several hundred of the jets.
U.S. purchases alone are expected to be at least $396 billion for 2,440 aircraft through the mid-2030s.
But, observed Defense Update magazine, "based on the order options it has committed to, Israel is expecting to share about $1 billion worth of buyback related to the F-35 program.
"The system integration deal ... will allow an increased participation by Israeli industries in the JSF program."
Among the companies likely to benefit are state-owned Israel Aerospace Industries, flagship of the Jewish state's export-driven defense industry, which will build wings for the aircraft. IAI already builds wings for the F-16.
Another is Elrisa, a subsidiary of the leading electronic equipment manufacturer Elbit Systems, the Israeli air force's top electronic warfare systems supplier.
Elbit, in conjunction with Rockwell Collins of the United States, produces the advanced helmet worn by pilots of the single-seat JSF.
Delivery of Israel's F-35Is is expected to start sometime in 2016. Israel has already decided to buy a second tranche of 20 to equip another squadron.
It has originally intended, several years ago, to acquire 100 of the stealth fighters, at an estimated cost of $5 billion. But that was trimmed back to 75 as the cost of the jet rose alarmingly because of development woes.
"It's unbelievable," a senior Israeli officer told Defense News. "First it was $40 million to $50 million per plane, and then they told us $70 million to $80 million. Now we're looking at nearly three times that amount, and who's to say it won't continue to climb?"
With Israel having to cut back its defense budget to boost social spending, the funding problem becomes more acute, which is why the anticipated $450 million program using Israeli systems is so important to Israel's Defense Ministry.