The exercise will focus on providing a joint defence against a simulated co-ordinated missile attack on Israel.
Up to 2,000 joint military personnel are believed to be taking part, along with at least 15 American ships.
The Israeli army said the exercise was not a "response to any world events" but had been planned for a while.
It is thought that a highly sophisticated new American radar, based in the Israeli desert, will be central to the exercise.
Two-fold significance
The simulation will involve elements such as barrage of missiles fired on Israel from all points south, east and north.
The BBC's Middle East correspondent Tim Franks said many observers inside Israel believed the exercise carried a two-fold significance.
This included sending a message of deterrence to any would-be attackers of Israel - whether they were in Gaza, Lebanon, Syria or Iran.
It was also possibly an attempt to reassure Israel's people that the US took the country's security seriously - especially at a time when the US has expressed increasing concern about Iran's nuclear programme, although Tehran insists it is purely peaceful.
Analysts say use the manoeuvres could also serve to make Israel feel more secure, and therefore encourage a return to Israeli-Palestinian negotiations.
Last week, Turkey, one of the few Muslim countries with whom Israel has had good contacts, cancelled a joint air force exercise with Israel.
Israel, Turkey and the US countries took part in a joint exercise in the Mediterranean Sea, off Haifa last year.
Tim Franks said Turkish-Israeli relations have become strained this year, since Turkey heavily criticised Israel's war in Gaza.
The exercise, which is entitled Juniper Cobra, is due to finish on 5 November.
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