"The proposed sale of this equipment and support will not alter the basic military balance in the region," it said in a statement. Beijing has repeatedly demanded the United States - Taiwan's most important arms supplier - halt the sale of weapons to the island.
The Pentagon said the principal contractor would be Lockheed Martin Corp (LMT.N), which makes the F-16.
Taiwan's defense ministry said the new equipment would be used for its latest F-16V aircraft, improving their ability to detect and track long-range targets and "greatly improve the effectiveness of air operations".
China's repeatedly sending military aircraft and drones into air space near Taiwan represents a serious threat to the island, and the ministry expresses its gratitude to the United States for the sale, it added in a statement.
Taiwan's military spending will rise by 3.5% year-on-year hand hit a record high in 2024, President Tsai Ing-wen said on Monday, pledging to improve defenses amid a growing threat from China, which views Taiwan as its own territory.
The $500 million is the maximum potential value of the contract and the actual dollar value will be lower, the Pentagon said. The United States unveiled a Taiwan weapons aid package worth up to $345 million late last month.
Despite approval by the State Department, the notification does not indicate that a contract has been signed or that negotiations have concluded.
However, Taiwan's defense ministry said it expected the sale to "take effect within a month".
Taiwan has been converting 141 F-16A/B jets into the F-16V type and has ordered 66 new F-16Vs, which have advanced avionics, weapons and radar systems to better face down the Chinese air force, including its J-20 stealth fighters.