Developed jointly by Israel and the United States, the Arrow anti-ballistic missile is intended against theater ballistic missile threats.  It uses an explosive kill mechanism, and is intended to be part of a layered ballistic missile defense system. Besides the technology gains for the U.S. and the direct protection to Israel, it is seen as protecting U.S. troops in the Middle East.
It can be said that the MIM-104 Patriot PAC-3, a U.S. Army missile, is the lower tier of this system. If there are tiers above it, the level immediately above will use the Terminal High Altitude Area Defense (THAAD) missile; an AN/TPY-2 radar used for THAAD is already deployed in Israel.
Israel has had discussions about modifying the RIM-161 Standard SM-3, in use by the U.S. Navy ships with the AEGIS battle management system and AN/SPY-2 radar, to be used as the highest-altitude, longest-range tier. SM-3 has demonstrated anti-satellite missile capability against a decaying U.S. satellite.
Arrow system components
Besides the missile itself, there is a Green Pine radar, and a Citron Tree fire-control system, cost $1.3 billion to develop. According to Globalsecurity, this cost $1.3 billion, which could double in full deployment.
The Green Pine radar is a phased-array phased zquisition and engagement radar, built by IAIA. The Arrow missile itself is equipped with an active radar and infrared seeker. 
Exports could lower the cost. India has already bought Green Pine. India, Japan, Turkey and the United Kingdom have all expressed some interest in the system.
The final bill is expected to be double the billion dollars spent so far. This cost could be reduced if the Arrow 2 is sold to other countries which have expressed interest - such as Great Britain, Turkey, Japan and reportedly India. In 2002, the U.S. blocked sale of the Arrow missile to India, claiming it was a violation of the Missile Technology Control Regime (MCTR). n early 2002 American officials sought to stop Israel from selling the Arrow 2 interceptor missile to India, arguing that the sale would violate the Missile Technology Control Regime. While the Arrow might be able to achieve the 300 km trigger range for the MCTR, it is not designed for operation at that distance. Further, it is questionable if it could carry the other trigger, a 500 kg warhead, to that range. 
Israel plans to procure 200 interceptors.
- One battery at Palmachim to protect Tel Aviv
- Onse battery at Ein Shemer near Hadera.
- One battery to be deployed in the south.