Israel said on Monday it carried a successful test of the latest generation Arrow missile system, the Arrow 3, that can intercept missiles from Iran, taking a further step in bolstering its defence plans.

The defence ministry said the flight test was conducted by Israel's Missile Defense Organisation and US Missile Defence Agency officials.

"This is the first flight test of the Arrow 3 interceptor and was conducted at an Israeli test range over the Mediterranean Sea," the ministry said.

The Arrow is a jointly-produced, cutting-edge system designed to counter long-range missile attacks, mainly from Israel's arch-foe Iran.

A senior defence ministry official, briefing journalists on condition of anonymity, said that unlike previous versions, the latest interceptor was designed to intercept targets above the Earth's atmosphere.

It would take its place alongside the existing, lower-trajectory Arrow 2, the US-Israeli David's Sling medium-range defence system and the home-grown Iron Dome setup, which has already seen service against short-range attack, he said.

"The Arrow 3 is the upper tier for exo-atmospheric interceptions to provide the state of Israel additional opportunities for interception of incoming missiles from Iran or elsewhere."

"This is the first flyout, it is the first time that (it) flew through the air," the official said. "This is the first time the interceptor with all of its equipment took off and flew."

Israeli public radio said the test lasted for six minutes over a course of 100 kilometres (62 miles) during which it did "different manoeuvres."

The official said the test was unrelated to growing regional tension.

"The test has nothing to do with the current political environment between Israel and elsewhere," he said, adding that he could not say when the system would become operational.

Israel, along with the United States and much of the West, suspects Iran is seeking a nuclear weapon, allegations Tehran strongly denies.

The Jewish state, the Middle East's sole, albeit undeclared, nuclear power, believes Iran must be prevented from reaching military nuclear capabilities at any cost and refuses to rule out military intervention to achieve that goal.

Yair Ramati, Arrow 3 project leader, said the defence system when operational will "intercept missiles with nuclear weapons in particular".

"It goes far, faster and hits harder. It may intercept any missile.... in space," he said on public radio.

"We will carry out another flight test and then.... intercept a target before heading to the production stage," Ramati said without specifying when the system will be operational.

The system comprises of a radar which detects and transfers its missiles information to a control centre, which starts the launch of a missile after analysing the trajectory of the ballistic missile to intercept.

Prime Minister Benjamin Netanyahu welcomed Monday's successful" test.

"While Israel's hand is always extended in peace, we are always prepared for other possibilities as well," Netanyahu said.

"In this context, I welcome the successful test of the Arrow-3 missile; it expresses the high technological and security abilities of the State of Israel, the defence industries, the defence ministry and our cooperation with the US."

Iron Dome has already been tested in battle. In eight days of fighting between Israel and Palestinian militants in November, the Israeli military said it brought down 421 of 1,354 rockets fired from the Gaza Strip.

Of those which landed, 58 hit urban areas while the rest fell in open fields, causing no damage.