The National Defense Authorization Act (NDAA) calls for nearly $700 billion of military spending for the coming fiscal year, but Congress has yet to fully fund it.
"With the signing of this defense bill, we accelerate the process of fully restoring America's military might," Trump said at a White House signing ceremony, where he was flanked by Pentagon top brass including Defense Secretary Jim Mattis, AFP reported.
"This legislation will enhance our readiness ... and modernize our forces, and help provide our service members with the tools that they need to fight and to win."
While the NDAA passed Congress with bipartisan support, lawmakers have not agreed on how to fund the mammoth spending package, which amounts to more than that of the world's next seven militaries combined.
Trump called on Democrats in Congress to get in line with Republicans and back a "clean funding bill."
"We must work across party lines to give our heroic troops the equipment, resources, and support that they have earned a thousand times over," Trump said.
The president also took aim at Obama-era budget caps known as sequestration, which Republicans in Congress love to hate.
"Congress must finish the job by eliminating the defense sequester and passing a clean appropriations bill," Trump said. "I think it's going to happen. We need our military. It's got to be perfecto."
Trump campaigned on the pledge of increasing military spending and has said America needs more ships, submarines, troops and missiles.
He said the NDAA would give troops their biggest pay increase in eight years.