"The security environment in Europe, including in the North Atlantic, has changed for the past 10 years and Icelandic and US authorities agree on the need to reflect this in a new declaration," Iceland's Foreign Minister Lilja Alfredsdottir said in a statement.
"In particular, we want, in this new declaration, to highlight the rotational presence of US military forces in Iceland, which constitutes a gradation in our cooperation," she added.
During World War II, the Keflavik military base was a key US base and it remained important to the NATO alliance during the Cold War.
Its usefulness to the alliance then dwindled over the years, prompting Washington to withdraw its armed forces in 2006.
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But in the past two years, the US military has run surveillance missions in NATO airspace operated from Icelandic territory.
The missions come amid rising tensions with Moscow and world powers' increasing interest for the Arctic region and shipping routes.
The US-Iceland declaration signed this week also says the two countries will "explore increased cooperation, including possible joint exercises, training activities and personnel exchanges" in search and rescue operations among other things.
In its 2017 budget, Washington has allocated USD 21.4 million (19.2 million euros) to upgrade the Keflavik base with the aim of stationing P-8 reconnaissance planes there, according to specialists citing US military sources.