The deployment of the Terminal High Altitude Area Defence anti-missile system was taken jointly by the US and South Korea, the Pentagon said in a late night statement.
The two countries made an alliance decision to deploy THAAD to US Forces Korea (USFK) as a "defensive measure to ensure the security" of South Korea and its people, and to protect alliance military forces from North Korea's weapons of mass destruction and ballistic missile threats, it said.
They began talks in February when North Korea launched a long-range rocket after a fourth nuclear test in January. The two allies are working closely to ensure its swift deployment.
The THAAD deployment will contribute to a layered missile defence that will enhance the alliance's existing missile defence capabilities against the North's missile threats.
"When the THAAD system is deployed to the Korean Peninsula, it will be focused solely on North Korean nuclear and missile threats and would not be directed towards any third party nations," the Pentagon said.
"North Korea's nuclear test and multiple ballistic missile tests, including the recent intermediate-range ballistic missile (IRBM) launches, highlight the grave threat that North Korea poses to the security and stability of the Republic of Korea (RoK) and the entire Asia-Pacific region, it said.
The Pentagon said that following the review that began in February, a joint working group confirmed the military effectiveness of THAAD on the Korean peninsula.
The Pentagon did not disclose when the system would be deployed, saying the two nations were in the final stage of selecting a potential venue.
But the powerful defence system, which fires projectiles to destroy enemy missiles, is likely to be deployed latest by the end of 2017.
"When the THAAD system is deployed to the Korean Peninsula, it will be focused solely on North Korean nuclear and missile threats and would not be directed towards any third party nations," the Pentagon said.
China, which has backed tough UN sanctions against the North after Pyongyangs nuclear test and a long-range rocket launch this year, has objected to the proposed THAAD deployment in the South as its radar can reach into its territory.
On Friday, China's foreign ministry said it was strongly opposed to the US' deployment of the THAAD missile defence system to South Korea and urged the two countries to put a stop to it.
The missiles' deployment is not beneficial to maintaining peace and stability on the Korean peninsula and will seriously harm the security of countries including China, the ministry said.
Ex-IAF officer creates plane to conquer fear of flying
How India gains by selling BrahMos to Vietnam
India's defence needs more money, Mr PM
PHOTOS: Life inside an aircraft carrier
Malabar war games are a counterpunch to China