The US Senate has approved $696 billion (£345 billion) in increased military spending, including boosted funds for operations in Iraq and Afghanistan.
The bill has passed through both houses of Congress and is expected to be signed by US president George Bush soon.
Increased funding for the Iraq war was put into doubt after Democrats, who favour a pull-out from the country, took control of both legislative houses in midterm elections last year. The party had attempted to tie increased funding for the war to a date for a full withdrawal from operations.
Previous attempts by the party to pass laws containing the condition have failed and the only bill which contained the clause was vetoed by Mr Bush earlier this year.
In addition to $189 billion (£94 billion) in funds for operations in the Middle East, the present bill will increase the pay of servicemen by 3.5 per cent and also sets aside funds for the medical care of veterans.
However, the bill places obstacles in the way of the Bush administration’s plan for setting up a missile defence shield in Europe. The White House hopes to set up interceptor systems in the Czech Republic and Poland to protect the US from missiles launched by rogue states.
The legislation requires the parliaments of the two European countries to give the go-ahead for the proposal and for the defence department to brief Congress about the programme before the release of funds.
Under the US political system, the president must ask Congress to appropriate funds to programmes it wishes to implement.