After years of delay, the Compact agreement between Palau and the United States has finally been renewed, but funding still needs to be approved.
The Palau Compact was included in the 2018 National Defense Authorization Act signed into law by President Donald Trump last week.
The Compact has been awaiting congressional approval since 2010.
The Palau President Tommy Remengesau Jnr has thanked Mr Trump, and said the action after years of delay sends a clear message to the people of the Pacific that the US stands again with its friends.
The U.S. Secretary of the Interior Ryan Zinke says the U.S. Insular Areas are on the front lines of North Korean aggression and are an important part of the strategic defense for the United States.
Mr Zinke said authorising funding is important to maintain stability in the Western Pacific.
Congress must now approve a budget to fund the Compact's implementation.
The agreement promises a total of $US 229 million US dollars in funding for Palau through 2024, and Mr Trump has called on Congress to make $US 124 million of that available in the 2018 fiscal year.