The news sent Orbital's shares soaring by more than 19 percent at $131.79 before the opening bell. Northrop's stock was unchanged in premarket trading.
Northrop's offer price of $134.50 per Orbital share represents a premium of 22 percent over the stock's Friday close.
Orbital has billion-dollar contracts with NASA and the Army, as well as contracts with the U.S. Missile Defense Agency.
The deal, expected to close in the first half of 2018, comes as the firing of missiles by North Korea in recent months has focused attention on missile defense systems. Orbital's defense systems group includes its development of advanced missile interceptors.
Northrop's existing sectors are aerospace systems, mission systems and technology services. Orbital CEO David Thompson said in a statement the deal will allow his company "to maintain strong operational performance on existing programs while we pursue new opportunities that require the enhanced technical and financial resources of a larger organization."
Orbital delivered the Air Force's ORS-5 spacecraft into orbit on Aug. 26 using its Minotaur IV rocket, the 26th successful launch of the platform.
The rocket company said on Sept. 6 it is in the final stages of testing the solid rockets boosters the company is building for NASA's space launch system. Orbital said the two solid rocket boosters for the heavy launch SLS platform will be on time for NASA's first planned flight in 2019. NASA is building SLS to take crew and cargo beyond Earth's orbit, with Mars as an eventual destination.
Northrop will assume $1.4 billion in Orbital's net debt as part of the deal, the companies said.
On a pro forma basis, Northrop said it expects 2017 sales of $29.5 billion to $30 billion.
Reuters on Sunday reported about the potential deal, citing a person familiar with the transaction.
Perella Weinberg Partners is the financial adviser to Northrop while Citigroup is advising Orbital.
— Reuters contributed to this report.