It was a personal tragedy for the 270 people killed in the crash and their families.
But it also irrevocably soured relations between America and much of the Arab world.
It now appears Libya is prepared to take the blame for the atrocity and pay a large compensation package to the victims’ families.
Lawyers for the families and Libyan officials signed a deal on Wednesday to set up the 2.7 billion dollar fund.
Libya is expected to follow up by sending a letter to the United Nations Security Council, taking responsibility for the bombing.
In return, international sanctions will be lifted on the North African country and it will be taken off Washington's list of terrorism sponsoring nations.
But it has taken 13 years of investigations, court cases, sanctions, recriminations and diplomatic pressure to reach this pass.
On 21 December 1988, New York-bound Pan Am Flight 103 exploded 31,000 feet over Lockerbie, Scotland.
The crash turned the small Scottish farming town into an inferno.
One whole neighbourhood erupted in flames.
The faces of the townspeople and firemen were drawn with the shock of it, no one knowing what had really happened to their little town.
Each feared some of the neighbours they had seen only minutes or hours before, were dead.
As it turned out, 11 residents of Lockerbie were killed on the ground as debris, body parts and fire rained down from the sky.
All 259 people on board were killed, including 189 Americans.
Christmas was called off that year in Lockerbie as the bodies came in from the morgue to a village church, and the spectre of the disaster has haunted the town's festive season ever since.
"It is the worst case of airline terrorism - the largest mass murder in the world," said John Grant, a Lockerbie expert and a law professor at the University of Glasgow.
US and British investigators ruled that a bomb, not mechanical failure, had caused the explosion.
More than 11 years after the crash, verdicts were handed down on 31 January 2001, against two Libyans, Abd al-Baset Ali Mohmed al-Megrahi and Al Amin Khalifa Fhimah.
Al-Megrahi was found guilty of 270 counts of murder, while Fhimah was acquitted.
Qadhafi says Libya has been put
under intolerable pressure
The pair stood trial in a Scottish court in Camp Zeist, a former US air base 20 miles south of the Dutch capital, Amsterdam.
The case lasted the better part of a year and cost 90 million dollars.
Authorities said Al-Megrahi and Fhimah manufactured the bomb out of Semtex plastic explosives and concealed it in a cassette recorder.
They then hid the recorder in a suitcase and slipped it aboard an Air Malta flight, headed from Malta to Frankfurt, Germany.
The unaccompanied bag was then transferred to a Pan Am flight to London and then to Flight 103.
But despite the damning verdict, controversy still rages over what really happenned that fateful night.
Those who blamed the Libyans theorised it sought revenge for the US bombing of Tripoli, the Libyan capital, in 1986.
Then-President Ronald Reagan ordered the bombings in retaliation for the bombing of a Berlin nightclub where US military personnel were killed.
According to another theory, the Iranians blew up the plane to avenge the shooting down of an Iranian jetliner in the Persian Gulf in 1988.
However, even now that Libya is on the verge of accepting responsibilty, many believe we are no closer to knowing who targeted the Pan Am flight or why.
The Libyans have long argued they have been put under intolerable diplomatic and economic pressure to force an admission.
But the real culprits, they, say, will probably never be known.