Lithuania on Monday signed a deal for German-made armoured vehicles intended to boost its defence capabilities, as it seeks to allay concerns of a military resurgence of Russia on its doorstep.

In its biggest-ever arms purchase, the Baltic NATO member will buy 88 Boxer armoured fighting vehicles for 386 million euros ($435 million).

Produced by the German-Dutch ARTEC consortium, the vehicles are fitted with Israeli-made turrets.

"It's a long-term investment into national defence and also a signal that Lithuania takes its security and investing in it seriously," Defence Minister Juozas Olekas said after inking the deal.

The first vehicles are expected to arrive in Lithuania in 2017 and the rest by 2021.

The largest of the three Baltic states that broke free from the crumbling Soviet Union in 1991, Lithuania has increased its defence budget by about a third each year since 2014, when Russia annexed the Crimean peninsula from Ukraine.

Next year, the nation of three million has earmarked 725 million euros for defence, or 1.79 percent of economic output.

Alarmed by the Russian annexation of Crimea and a series of war drills staged near its borders, it also reintroduced limited conscription last year.

Despite the efforts, Lithuania largely depends on its NATO partners to guarantee its security.

Germany agreed to lead a multinational battalion in Lithuania last month when NATO approved a troop boost in the Baltic states and Poland to reassure allies once ruled from Moscow.

The Kremlin denies any territorial ambitions and insists that NATO is trying to encircle Russia.