The United States Department of State authorizes any arms deal with Taiwan.
The decision is expected to bring bad blood to China, which sees Taiwan as Chinese territory and does not recognize it as an independent state.
Tensions between China and the US have been rising for some time.
The State Department approved a proposal to sell Taiwan an upgrade package for its patriot air defence systems worth some $ 500 million.
That package does not include missiles, but maintenance, testing and repairs of the current Taiwanese arsenal.
The proposed sale will help “maintain political stability, military balance and economic progress in the region,” said the United States Defense Cooperation Agency (DSCA).
The prime contractor in the proposed deal will be the American defence group, Lockheed Martin. The US parliament was informed of the possible agreement on Thursday.