Israel's buying 20 of the fifth-generation jets and eventually wants as many as 75. State-owned Israel Military Industries is already manufacturing components for the F-35.
Elbit designed the helmet-mounted display system, or HMDS, and will co-produce it with Rockwell Collins of the United States.
"We appreciate the confidence and support of the Pentagon's F-35 Joint Program Office and Lockheed Martin leading to this decision," said Bezhalel Machlis, president and chief executive officer of Elbit Systems.
"The F-35 HMDS leverages tremendous innovation, technology base and experience gained by Elbit Systems and Rockwell Collins through nearly two decades of collaboration in development, production and fielding of thousands of advanced helmets for fighter aircraft."
But despite such gratitude, there's still lingering resentment in Israel that 26 years ago U.S. pressure forced the Jewish state to scrap a high-profile project to build its own fighter, the Lavi, that many say would have established Israel Aerospace Industries as the producer of world-class combat aircraft to rival the Americans.
Diehard Lavi supporters, like Moshe Arens, a senior figure in Israel's defense establishment, say IAI and other Israeli defense companies are hustling for scraps from the U.S. defense industry while having to pay dearly for F-35s.
Arens, who served as Israel's defense minister three times, observed in a commentary published in the daily Haaretz Oct. 1 the cancellation of the Lavi project Aug. 30, 1987, approved by the cabinet with a 12-11 majority, "sentenced IAI" -- then Israel Aircraft Industries -- "to remain a medium-sized player" in the global aerospace industry.
The Americans, who invested more than $2 billion in the seven-year Lavi program, had pressured Israel to scrap the project because of spiraling costs and because they saw it as a threat to Lockheed's star fighter, the F-16 Fighting Falcon, and the McDonnell Douglas -- now Boeing -- F/A-18C/D.
Had the Israeli government resisted U.S. pressure and proceeded with the Lavi -- Hebrew for Lion -- to develop a high-performance indigenous fighter aircraft, Arens wrote, IAI could have "fulfilled its potential to become a rival to Boeing, Lockheed, Grumman or General Dynamics."
The single-engine, delta-wing Lavi, with a top speed of 1,200 mph from its U.S. Pratt & Whitney PW1120 afterburning turbofan power plant, made its first test flight Dec. 31, 1986. Nine months later it was no more.
The Israelis had projected export sales of 407 to South Africa, Chile, Taiwan and Argentina.
Within months of the cancellation, Israel's Defense Ministry ordered 90 F-16C aircraft from Lockheed, and it's been buying advanced models of the F-16 and Boeing's F-15 Eagle ever since.
Arens, a former vice president of IAI and Israeli ambassador to Washington, lamented in an earlier op-ed published by Haaretz July 28, 2010: "Some years ago Israel was developing the world's most advanced fighter aircraft, the Lavi, while the Western world's aircraft manufacturers were beating their way to our door, eager to participate in the Lavi project, or trying to sell their competing planes to the Israeli Air Force.
"And now Israel goes hat in hand pleading for a chance to be allowed to acquire the F-35, at a price tag of $150 million each. ... Just imagine Israel's position today had the Lavi project not been canceled."
The air force "would be operating the world's most advanced fighter, upgraded over the years to incorporate operational experience and newer technology," Arens wrote.
Despite the evangelical belief in the Lavi held by Arens and others, the doomed project was not a total loss.
The technologies developed for Lavi were used in other projects, defense and civil, and produced defense exports.
The EL/M-2932 pulse doppler radar, developed for the Lavi by IAI subsidiary Elta, has since been exported for a wide range of aircraft.
China's J-10 fighter bore a remarkable resemblance to the Lavi and followed Israel's growing defense ties with Beijing, and caused friction between Israel and the United States.
Lavi technology went on to contribute greatly to other Israeli achievements, such as the military surveillance satellites first launched in the 1990s and IAI's landmark Arrow anti-ballistic missile.