An Australian-designed military drone that uses artificial intelligence technology to target enemies has been unveiled to the public, the first military plane to be designed and built locally in more than half a century.

Developed by the Royal Australian Air Force (RAAF) and US manufacturer Boeing, the Loyal Wingman drone has a range of 3,700 kilometres and is expected to eventually join manned aircraft such as Joint Strike Fighters into battle.

The working prototype of the Loyal Wingman unveiled today will now begin ground testing, with taxi tests and flight tests due later this year.

The Federal Government has contributed $40 million towards the historic and secretive project.

Prime Minister Scott Morrison hailed the aircraft's development as a "truly historic moment for our country and for Australian defence innovation".

"The Loyal Wingman will be pivotal to exploring the critical capabilities our Air Force needs to protect our nation and its allies into the future," Mr Morrison said in a video message released at today's unveiling.

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Air Force Chief Air Marshal Mel Hupfeld said the rollout of the first aircraft was a significant milestone in the Boeing Loyal Wingman project.

"This project is an excellent example of innovation through collaboration and what can be achieved working together with defence industry," Air Marshal Hupfeld said.

The RAAF plans to buy three drones, which Boeing calls the Airpower Teaming System (ATS), as part of the Loyal Wingman Advanced Development Program.

ATS uses artificial intelligence to complement and extend missions flown by traditional combat aircraft.

Mass production of the unmanned jet fighter is likely to begin by the middle of the decade.

"We are expecting middle of the decade, maybe a bit earlier, that this will be in production," Boeing's Shane Arnott said.