The operation, called Austere Challenge 12, is aimed at testing the preparedness of Israeli and American defense systems against a possible multi-front missile attack on Israel, officials said.
Thousands of soldiers from the two countries are participating in the exercises, which are expected to last about three weeks.
The visit is the second to Israel this year for Dempsey, chairman of the U.S. Joint Chiefs of Staff.
On Sunday, the general met with Defense Minister Ehud Barak to discuss, among other things, a potential Iranian nuclear threat, Maariv reported.
Barak was later quoted as saying the security tie between the Unite States and Israel "is deeper and stronger than it has been in recent years."
During his visit, Dempsey will meet with other Israeli officials and visit areas where the missile defense drills are being conducted, reports said.
Notable deaths of 2014 [PHOTOS]
Syrian Al Qaida group executes Lebanese soldier