JERUSALEM (Reuters) - Israel's missile defense director has been dismissed for a "grave breach of information security", his ministry said on Sunday, a setback for U.S.-backed projects the country deems crucial for any future war with Iran or its allies.

In a statement, the Defence Ministry said the recently discovered security breach meant that Yair Ramati could not continue in the role. It did not elaborate on the offense, saying "relevant authorities" would be handling the case.

Three people familiar with Ramati told Reuters on condition of anonymity that he had improperly handled classified documents but was not accused of criminal misconduct such as espionage.

The Defence Ministry statement praised Ramati for his achievements during four years in office, crowned this month by a successful trial shoot-down in space by the Arrow 3 ballistic missile shield and final field test of David's Sling, a rocket interceptor slated for deployment in Israel next year.

The ministry wished him "great success for the future".

Under Ramati's watch, Israel also deployed its short-range interceptor Iron Dome, which according to Israeli and U.S. officials has had a 90 percent success rate in shooting down Palestinian guerrilla rockets from the Gaza Strip.

Israel invested in missile defense after its 2006 war in Lebanon, during which Hezbollah guerrillas rained rockets on its homefront. It worries about a possible ballistic missile exchange with arch-foe Iran, though its concerns about another enemy, Syria, have abated given that country's civil war.

Israel has received hundreds of millions of dollars in U.S. funding for the three missile defense systems, whose private contractors include Boeing Co., Raytheon, and Elbit Systems Ltd..

(Writing by Dan Williams; editing by Ros Russell)