President Clinton has postponed deployment of the controversial anti-missile defence system, leaving it to his successor to make the decision.
Russia and NATO countries have expressed concern at the US building such a system which could lead to an escalation of the nuclear arms race. Russia also says it would violate the 1972 Anti-Ballistic Missile treaty between the two countries which bans such systems.
Mr Clinton cited lack of "absolute confidence" in the existing technology as the reason for putting off the decision on going ahead with what is called the National Missile Defence (NMD) system. It is designed to protect all 50 states in the US against a nuclear missile attack from so-called "rogue states" such as North Korea, Iraq or Iran.
The last two tests on whether the US can intercept an incoming missile with another missile had failed, but Mr Clinton has ordered work on testing the system to go ahead. He said it was still possible for NMD to be operational by 2006 or 2007.
Originally, the US planned to have the system operational in 2005 when North Korea and other countries would be able to launch a missile against the US, according to intelligence reports.
This meant the President would have had to give the go-ahead by mid-September this year for the construction of a radar site in the Aleutian Islands.
Mr Clinton, in a speech at Georgetown University, said he has given more time to his successor to try and reach an agreement with Russia and US allies over NMD.
"A national missile defence, if deployed, should be part of a larger strategy to preserve and enhance the peace, strength and security we now enjoy and to build an even safer world."
He said "The United States and Russia still have nuclear arsenals that can devastate each other and this is still a period of transition in our relationship. Therefore, for them, as well as for us, maintaining strategic stability increases trust and confidence on both sides. It reduces the risk of confrontation. It makes it possible to build an even better partnership and an even safer world."
The President's decision to put off deployment of NMD could become an election issue. The Republican candidate, Governor George Bush, has said he favours an even stronger national missile defence than the one now under discussion and that he is prepared to abrogate the ABM treaty with Russia if necessary.
He said yesterday: "I welcome the opportunity to act where they [the Democrats] have failed to lead by developing and deploying an effective missile defence system to protect all 50 states and our friends and allies."
Vice-President Al Gore has been less forthcoming during his campaigning, saying he favours continuing development work. He described the President's decision as a "wise one".
NMD which will cost an estimated $60 billion originated in the "Star Wars" project of the former president, Mr Ronald Reagan, based on lasers in space, but is a watered down version.
AFP adds:
Russia and NATO members yesterday welcomed Mr Clinton's announcement. The Russian army's number two, Gen Leonid Ivashov, told Interfax the decision was "constructive".
NATO Secretary General George Robertson hailed the "prudent course" of Mr Clinton, while Britain's Foreign Secretary Robin Cook was also supportive.