David Cameron has ordered more spending on drones and the SAS as Britain faces the "battle of our generation" to defeat extremist Islamist terrorism.
Defence chiefs have been told to target extra money on special forces and other counter-terror capabilities as part of the Strategic Defence and Security Review (SDSR).
New spy aircraft, including drones, to gather intelligence about Islamic State (IS), also known as Isis and Isil, or other terror groups should be considered, the Prime Minister said.
Speaking to RAF officers and airmen at RAF Coningsby, Lincolnshire, Mr Cameron said: "I would highlight one particular threat that I think is such a threat to our country, to our way of life and to peace and stability in our own country, and that's the treat of Islamist extremist terrorism."
The Prime Minister said a range of measures were being taken to combat the threat from young people travelling to the Middle East to join up with terrorists.
"We can do all of these things but, in the end, we need to do something else and that's make sure that Britain, with her allies, can destroy the fanatical Isil extremist state in Iraq and Syria," he added.
"We've done a huge amount already, and I want to thank the brave RAF crews who've flown so many missions over Iraq - more than any other country apart from the United States.
"But I'm quite clear that when it comes to the threats the country faces, this threat of extremist Islamist terrorism, a threat on our own streets and on our own people, as we saw tragically on that beach in Tunisia - this is the threat of our generation, the battle of our generation and fight that we're going to have.
"And I'm absolutely determined that the RAF, Army and Navy will have the equipment, the means and the resources to deal with it.
"One of the things that we need is making sure that we have the drones, spy planes and special forces - the unique capabilities that make sure we can deal with this threat at its source."
Mr Cameron wants the SDSR, due to conclude in the autumn, to prioritise resources that will help to protect the UK from evolving threats - not only terrorism and extremism but also an increasingly aggressive Russia and the risks posed by cyber attacks.
The review will also examine how the Royal Navy can work with partners such as the United States to use the new aircraft carrier HMS Queen Elizabeth, due to enter service in 2020, to deploy drones and special forces against terrorists.
RAF jets and drones are part of the coalition attacking IS in Iraq, but in Syria the drones are limited to a surveillance role - although ministers have begun setting out the case to extend the bombing campaign to the terror group's strongholds in that country.
Defence Secretary Michael Fallon said proposals about extending the mission would go before MPs but the Government was not planning an "early vote".
"We have made it clear it is a decision for the new parliament to take," he told the BBC Radio 4 Today programme.
"That is a matter for the new parliament in due course. We are not planning an early vote on it."
Mr Fallon also insisted the Government was not trying to meet the Nato target that countries should spend 2% of national income - a commitment Chancellor George Osborne agreed to met in last week's Budget - by including intelligence or aid spending.
However, he suggested that the remit of the Ministry of Defence budget could expand "marginally" due to the creation of a new £1.5 billion joint intelligence and defence fund.
"The Nato table of how much each country spends is drawn up by Nato guidelines, so it is up to Nato to rule what is included and what is not included," Mr Fallon said.
"It is money that is spent on defence and security, so it is not simply what is spent on the armed forces. Obviously there is money spent on defence intelligence as well."