Australia and the United States will be able to trade arms and defence technology more freely under legislation passed by the Senate.
The Defence Trade Controls Bill 2011 implements a treaty Australia signed with the US in 2007 to co-operate on the trade of defence and dual-use items.
AAP reports the agreement means companies won't have to get an individual export licence for every application to the US. It also allows some items to be exported from America without a licence.
The federal government says the bill will help deliver equipment to Australian troops faster.
It will also provide opportunities for the Australian defence industry to win contracts in the US defence market.
AAP reports about half of Australia's armamoments come from the United States. The defence force will replace or upgrade about 85% of its equipment during the next 10 to 15 years.
The United States passed legislation to implement the treaty in September 2010.
The bill will now return to the lower house for final approval.