Police were called to the UAV Engines site in Shenstone, Lichfield, where Palestinian flag-waving protesters clambered onto the roof and poured paint over the front of the building.
Others chained themselves to fencing and lay down on the ground in front of the main entrance, while a giant banner was put on display calling for the firm to be shut down.
The protesters claim the company, which is owned by Israeli firm Elbit Systems, is involved in manufacturing parts for drones used by the Israeli military against Palestinians.
The Lynn Lane site has been targeted on numerous occasions in the past.
Michael Fabricant, the Conservative MP for Lichfield, said: "This is a fairly regular and tedious demonstration.
"UAV employs local people and supplies equipment to the British armed forces.
"Perhaps if the Palestinians were able to establish a western democracy, like the state of Israel, sever their ties with terrorist organisations Hamas and Hezbollah – which have as their main policy the destruction of Israel – a workable peace treaty between the Palestinians and Israel can be achieved.
"Perhaps the demonstrators should spend their time trying to achieve those ends rather than attempting to damage local property."
Staffordshire Police Assistant Chief Constable Scott Green said officers were called to the scene at around 6am today.
He said: "We’re currently working to keep disruption to the community to a minimum and would like to thank those affected for their patience and cooperation.
"We have a number of specialist officers in attendance and are working with partners to resolve the incident safely."
In August 2014 a two-day protest was held at the site, which was followed by an anti-war demonstration that October.
The following July police, made 19 arrests after demonstrators ignored a High Court injunction banning them from within a 250-metre radius of the factory.