"In order to stop and overcome the Islamic State, we have learnt since 9/11 that there must be cooperation between intelligence agencies from across the free world, a sharing of experience and operational cooperation," he told public radio.
The Islamic State (IS) jihadist group is at the forefront of a sweeping militant assault that has overrun swathes of Iraq and holds significant areas of territory in neighbouring Syria.
US President Barack Obama on Friday called for a broad coalition to defeat the IS jihadists and he is to chair a key UN Security Council session on the threat on September 24.
"The intelligence that we gather in the Middle East -- which deals with threats from Iran, (Lebanon's Shiite) Hezbollah, what's happening in Syria, terrorist organisations in Sinai and the Gaza Strip - is of very good quality and we share it with our allies," he told the radio.
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Last week, Yaalon adopted a recommendation by the Shin Bet internal security agency and designated both the Islamic State and al-Qaeda affiliated Abdullah Azzam Brigades as an "illegal organisation" under Israeli law.
Last week, IS released a video showing the beheading of US journalist Steven Sotloff, who also reportedly held Israeli nationality, in the second such execution of a US journalist within a fortnight.
The Abdullah Azzam Brigades is a Lebanese jihadist group linked to Al-Qaeda which periodically claims rocket fire on Israel.