US President Donald Trump has been vocal about the need for states to pay an equal share towards defence
Defence Secretary Michael Fallon has joined with his US counterpart to put pressure on NATO states to pay their "fair share" on defence.
Speaking in London alongside General James Mattis, Sir Michael said that other NATO states needed to "raise their game".
He said if they were not going to deliver on their commitment to the target of spending 2% of GDP on defence then they needed to at least agree to year on year increases.
Just two days after the Prime Minister triggered Brexit, Sir Michael said the UK had "no closer friend than the US" as he rounded on other European states for failing to pay their way on NATO defence.
He said that only five of the 28 members hit the 2% target - the UK and the US being two of them and this at a time when "our security is more fragile than at any time since the end of the Cold War".
And the two demanded that NATO modernise by streamlining its decision-making process and taking a 360-degree approach to security threats.
Sir Michael said: "Secretary Mattis and I have agreed that others must now raise their game and those failing to meet the 2% commitment so far should at least agree to year-on-year real-terms increases.
"And increased burden-sharing is not on its own enough.
"We've also agreed that NATO must modernise and streamline its military structures to ensure faster decision-making and take a 360-degree view of all the security threats that face us.
"NATO has the experience and resources to combat international terror."
In a demonstration of the closeness of the US-UK alliance, Sir Michael announced a £90m contract for BAE systems to support the upkeep of the F35 fighter jets - the expensive joint UK-US fast jet programme.
In return, Gen Mattis praised the UK's military standing and said: "Britain's global leadership role is as needed today as at any time in history."
He said the allies stood together, adding: "Our two nations are bulwarks against the maniacs who think that by hurting us they can scare us. But they do not understand and we don't scare."
Professor Richard Whitman of Sky News said Sir Michael and Gen Mattis showed they were in "lock step" on getting NATO states to deliver on their promise to meet the 2% target.
He said their comments indicated "much more of a naming and shaming for those countries who aren't seen to be delivering on what is a formal commitment."
He added: "I think that Michael Fallon will be very pleased with that press conference. What we got over and over again was from the US really a commitment to reinvigorating the relationship."
Additional reporting from IRN