About 1,000 U.S. soldiers will participate in the exercise in Israel and another 2,000 U.S. troops in Europe and the United States will participate remotely, The Jerusalem Post reported.
An equal number of Israeli soldiers will be involved, a military official said.
During the Austere Challenge 12 exercise, Israeli air defense systems such as the Iron Dome anti-rocket shield and Arrow 2 anti-ballistic missile batteries will be deployed, along with U.S. and Israeli Patriot batteries.
Also participating will be U.S. naval ships with the Aegis missile-intercepting system, officials said. At least one U.S. Navy ship will dock at Haifa.
The Israeli military and the U.S. European Command will set up missile defense batteries across Israel, the Post said. While most of the drill involves computer-generated simulations, officials said the drill will include the firing of a Patriot missile at a mock enemy projectile.
"Anyone can take away any message they want from this," said Israeli Brig. Gen. Nitzan Nuriel, head of Israel's side of the exercise. "The fact that we are working together is a strong message by itself."
U.S. Air Force Lt. Gen. Craig Franklin, the senior U.S. officer for the exercise, said the joint exercise has "no relation" to any real-world events.
"This is a defensive exercise for missile defense capabilities in Israel," Franklin said. "It's not there to send a message, but to prove a defensive missile capability for Israel."
Franklin and Nuriel said the countries each would be spending about $30 million on the exercise.
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