Dhruv, the Advanced Light Helicopter manufactured by Hindustan Aeronautics Limited, was formally inducted in the Israeli defence forces on Thursday.
It will be used to ferry VIPs and defence officials.
Israel is leasing the helicopter from HAL, whose experts had been camping in Israel for weeks to train their counterparts in the use of the ALH.
Israel Aircraft Industries, which has supplied the avionics system and glass cockpit for the ALH and is also marketing it, has signed a memorandum of understanding with HAL to further enhance cooperation in various fields of operation.
Shimon Ekhaus, Executive Vice President at IAI, said, "We hope Dhruv, the North Star, will fly over the world."
Calling the development a good example of cooperation between the industries of the two countries, Indian Ambassador to Israel, Arun Kumar Singh, said that both countries have a "natural compatibility" in the area.
HAL and IAI are working to get a Federal Aviation Authority certification for the helicopter to facilitate its sale in the US, defence sources said.
Prominent among those who have shown interest in purchasing the helicopter are US Customs and the Chilean combined armed forces that performed a series of evaluation tests on the ALH.
Dhruv is a multi-role, multi-mission new generation helicopter in the 5.5 tonne weight class. It set a new world record by flying at an altitude of around 8,000 meters in the Himalayan mountain ridge.
Israel is the second country to use the helicopter after Nepal.
