The clock is so precise that it will lose less than one second over billions of years, "allowing scientists to measure time at an unprecedented scale," the ministry said in a statement.
"The trialling of this emerging, groundbreaking technology could not only strengthen our operational capability, but also drive progress in industry, bolster our science sector and support high-skilled jobs," Minister for Defence Procurement Maria Eagle said.
The groundbreaking technology by the Defence Science and Technology Laboratory will reduce reliance on GPS technology, which "can be disrupted and blocked by adversaries," the ministry added.
It is not a world first, as the University of Colorado at Boulder developed a quantum clock 15 years ago with the US National Institute of Standards and Technology.
But it is "the first device of its kind to be built in the UK," the statement said, adding it could be deployed by the military "in the next five years".
A quantum clock uses quantum mechanics -- the physics of matter and energy at the atomic and subatomic scale -- to keep time with unprecedented accuracy by measuring energy fluctuations within atoms.
Accurate timekeeping is crucial for satellite navigation systems, mobile telephones and digital TV, among other applications, and may open new frontiers in research fields such as quantum science.
Companies and governments around the world are keen to cash in on the huge potential benefits quantum technology could bring.
Google last month unveiled a new quantum computing chip it said could do in minutes what it would take leading supercomputers 10 septillion years to complete.
The United States and China are investing heavily in quantum research, and the US administration has imposed tight restrictions on exporting such sensitive technology.
One expert, Olivier Ezratty, told AFP in October that private and public investment in such technology had reached $20 billion during the past five years.
The defence ministry said future research would "see the technology decrease in size to allow mass manufacturing and miniaturisation, unlocking a wide range of applications, such as use by military vehicles and aircraft".
