The US State Department has approved granting the license necessary to sell Taiwan the technology needed for its submarine project.
The agreement is likely to irritate Mainland China, which regards the island as part of its territory.
The US approval comes after President Donald Trump last month signed new rules allowing top-level US officials to travel to Taiwan.
China has protested the decision, saying the US should stop official exchanges with Taiwan to avoid “damaging Sino-US relations.”
Taiwan last year started a plan to manufacture its submarines amid worsening relations with China and beliefs of buying the subs from the US is hopeless.
Taipei has long tried to procure submarines from the US. In April 2001 then-president George W. Bush approved the sale of eight conventional submarines, but there had been no progress on the deal.
Taiwan’s navy currently operates a fleet of four submarines, bought from abroad but only 2 of them can be deployed in the event of war. The other two were built by the United States in the 1940s and are only used in training as they are too old for combat.
Her office expressed thanks to Washington for the license approval. “The US government’s decision will not only help Taiwan in raising its defense capabilities, but it will also greatly benefit security and stability in the region,” Taiwan President said.