The British Army is fitting out its tanks with 515 'telescope' cannons at the cost of £150m ($242m).
The UK has been working on the weapon with France since 2009 and expects to fit the new cannons to its Scout SV and Warrior tanks.
Defence Secretary Michael Fallon announced the new contract on 1 July.
"Signing the Cased Telescope Cannon production contract is a major milestone for the UK's Armed Forces," said Lieutenant General Sir Chris Deverell, chief of materiel at the Ministry of Defence (MoD).
Deverell believes that the new compact ammunition for the cannon will reduce a "logistic burden" on the army by allowing the tanks to carry more ammunition. Special "airburst ammunition" rounds have also been developed for the weapon and it can use a variety of other rounds.
The MoD said that despite the 'telescope' name, the cannon takes up less space than a conventional 40mm gun while packing the same firepower.