The agreement marks a significant step in South Korea's relations with the US and comes amid a period of growing tensions on the Korean Peninsula: with the nuclear-armed North Korea, and an expansionist China to the west.
The agreement between the US and South Korea comes as leaders from both countries reached a broad trade deal earlier last month that would see reciprocal tariffs cut to 15% from 25%.
US President Donald Trump had slapped a tariff rate on Seoul of 25% earlier this year - which his counterpart Lee Jae Myung managed to negotiate down to 15%, after Seoul said it would invest $350bn (£265bn) in the US, including $200bn in cash investment and $150bn in shipbuilding.
In a White House readout released on Thursday, the US said it had "given approval for the Republic of Korea to build nuclear-powered attack submarines... [and would] work closely to advance requirements for this project, including avenues to source fuel".
In an earlier post on his social media platform Truth Social, Trump had said the vessels would be constructed at a shipyard in Philadelphia run by South Korean conglomerate Hanwha.
Only six countries currently possess nuclear-powered strategic submarines: the US, China, Russia, the UK, France and India.
South Korea already possesses about 20 submarines, but they are all diesel propelled and therefore need to surface far more frequently. Nuclear submarines are also able to operate further and faster.
"I have given them approval to build a nuclear-powered submarine, rather than the old-fashioned, and far less nimble, diesel-powered submarines that they have now," Trump had wrote on Truth Social.
South Korea is a powerhouse when it comes to civilian nuclear energy. It had a nuclear weapons programme in the 1970s but gave it up following US pressure.
And so its ability to enrich or reprocess uranium is limited by the US as it is entirely dependent on imports.