US Secretary of Defence Mark Esper made a rare visit to Algeria on Thursday for talks with the president on Libya and the troubled Sahel region.
Both countries are alarmed by the threat posed by extremist groups in North Africa and the Sahel, and Algeria is considering a more active military role outside its borders.
Mr Esper and President Abdelmadjid Tebboune "agreed to maintain co-operation and co-ordination", Algeria's presidency said.
The Pentagon said Mr Esper voiced support for expanding military relations with Algeria.
"The two leaders discussed security throughout North Africa and the Sahel and ways to advance our strategic military and diplomatic partnership," it said.
Mr Esper's visit is the first by a US defence secretary to Algeria since Donald Rumsfeld's in 2006 and he is also the most senior American official yet to meet Mr Tebboune.
The Algerian president took office in December after mass protests last year led the army to push his predecessor Abdelaziz Bouteflika to step down after 20 years in power.
The new president has proposed changes to the constitution aimed at pacifying the opposition protest movement, but the reforms would also give the army new powers to intervene in neighbouring states.
"Mark Esper wants to discuss the Algerian army's possible role in the region once the new constitution is passed, as it allows peace-keeping operations overseas," a western diplomat in Algeria told Reuters.
An Algerian source said the talks were expected to focus on Libya, where nine years of chaos after the overthrow of Muammar Qaddafi have created space for militants, and Mali, where French troops are trying to help quell an insurgency.
"Algeria has an influence in Mali. It showed it can help," an Algerian security source said.
"The Americans understood that French military intervention did not curb terrorism.
"As for Libya, it is well known that Algeria maintains good ties with all the players including tribes and personalities."