The German Government has approved the merger of tank manufacturer Krauss-Maffei Wegmann (KMW) with French armoured vehicle maker Nexter Systems.
Both firms signed an agreement to establish a joint holding company in July.
The merger will create a European defence technology group employing more than 6,000 people, with a current annual turnover of nearly €2bn, and orders worth approximately €6.5bn.
Germany Economy Minister Sigmar Gabriel was quoted by Reuters as saying: "The government has checked the request, the permission was granted."
KMW and Nexter first announced plans to establish the 'Kant' joint venture in 2014.
GIAT Industries and Wegmann, owners of Nexter and KMW respectively, will each take a 50% holding in the combined group, which will be headquartered in the Netherlands.
KMG's product portfolio includes air-transportable and highly protected wheeled vehicles, such as the Mungo, the AMPV and the Dingo, as well as anti-aircraft and artillery systems, such as the Fennek and the Gepard.
It also produces infantry vehicles, such as the Puma, as well as main battle tanks, such as Leopard 1 and 2.
Nexter supplies the Aravis, Titus, and VBCI armoured vehicles, the Caesar, Trajan, and 105LG1 artillery systems, and smart ammunition such as Bonus, as well as customer support and recycling services.