By Nick Childs BBC Pentagon correspondent

Lessons have been learnt in Afghanistan and Iraq

The helicopter, the Comanche, has been under development for two decades and would have cost nearly $40bn.

Senior army commanders say the decision to cancel the project was in part because of lessons learned in Iraq and Afghanistan.

The main contractors for the Comanche project, which has already taken $7bn, are Boeing and Sikorsky.

New technology overtakes

This is a dramatic reversal by the Pentagon.

At over $31bn, the Comanche is one of the most expensive weapons programmes ever to have been cancelled.

On the face of it, it should have found favour with the US Defence Secretary, Donald Rumsfeld - it was small, agile and stealthy.

But it has been dogged by problems over more than 20 years of development and has been overtaken by new technology.

Top army commanders also acknowledge that the decision to cancel it was influenced in part by the lessons learned from the emerging threats in Iraq and Afghanistan and the shooting-down of a number of US helicopters.

In the end, they decided their priority should be other types of new helicopters, modernising their current machines and providing them with more protection and spending more on unmanned reconnaissance drones.

Transformation struggle

This decision also shows that despite burgeoning defence budgets, it is proving a struggle for the Pentagon to meet all its goals under this administration of transforming the US military, fighting ongoing campaigns in Iraq and elsewhere and adapting to new security threats.

Priority will now be given to new type of helicopter

With so much money already spent on the Comanche and with jobs at stake, there are bound to be some complaints in Congress.

But this move is unlikely to produce the same furore as when Donald Rumsfeld cancelled the Crusader Howitzer programme in 2002.

This time, the army top brass seem to be united behind the decision and there are more concerns in Congress now about the growing defence budget and overall federal deficits.