Chinese-claimed Taiwan has complained of increased military pressure by Beijing to try and force the democratically ruled island to accept its sovereignty.
The package would include training, planning, fielding, deployment, operation, maintenance and sustainment of the Patriot Air Defense System and associated equipment, the Pentagon said, in a notification to Congress.
"This proposed sale serves U.S. national, economic, and security interests by supporting the recipient's continuing efforts to modernize its armed forces and to maintain a credible defensive capability," it said.
"The proposed sale will help to sustain the recipient's missile density and ensure readiness for air operations. The recipient will use this capability as a deterrent to regional threats and to strengthen homeland defense."
The United States is bound by law to provide Taiwan with the means to defend itself, despite the absence of formal diplomatic ties and the anger such weapons sales always generate in Beijing.
Taiwan's presidential office noted this was the third arms sale announced since President Joe Biden took office, and showed the "rock solid" nature of their relationship.
"Taiwan will continue to demonstrate its determination to defend itself, and continue to deepen cooperative partnerships with the United States and other like-minded countries," spokesperson Xavier Chang said in a statement.
Despite approval by the State Department, the notification does not indicate that a contract has been signed or that negotiations have concluded.
The Pentagon said Raytheon (RTX.N) was the prime contractor for the possible sale.
Taiwan's Defense Ministry said it expected the deal to "become effective" within the month.
The United States is Taiwan's main international arms supplier.