Netanyahu "welcomed the signing of a memorandum of understanding between Germany and the state of Israel to acquire the submarines," his office said in a Hebrew-language statement.
"This memorandum of understanding has strategic importance for Israel's security and its signing reflects the commitment of Germany and Chancellor Angela Merkel to Israel's security and the deep cooperation between the countries."
Negotiations on the sale had been frozen for three months due to concern in Berlin over a related corruption investigation in Israel.
In July, Germany put off the planned signing following the arrest of several Israelis on suspicion of offences including bribery and money laundering around the deal to buy the Dolphin submarines from German industrial giant ThyssenKrupp.
The investigation, which is still ongoing, involves officials from the Israeli security establishment, as well as people working locally for ThyssenKrupp.
An Israeli official said on Friday that Germany had conditioned the go-ahead on there being no corruption found on the part of the Israeli decision-makers and senior officials involved.
Housing Minister Yoav Gallant, who was a senior officer in the Israeli navy, wrote in a tweet on Friday that the three new warships would replace three old vessels, keeping its Dolphin fleet at six.
The submarines ordered by Israel are likely to be fitted with nuclear missiles but are primarily intended for spy missions off Iran or to attack that country in case of nuclear war, according to foreign military experts.
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