Libya has paid $1.5bn into a fund that will compensate US victims of attacks it carried out in the 1980s, in a move expected to establish full diplomatic and economic ties between Washington and Tripoli.
Sean McCormack, the US state department spokesman, called the move on Friday a "laudable milestone ... clearing the way for coninued and expanding US-Liban partnership".
The fund will compensate US victims of the 1988 bombing of Pan Am flight 103 over Lockerbie in Scotland and the 1986 bombing of the La Belle disco in Germany.
Libyan victims of US airstrikes that followed the Berlin attack will also be compensated with $300m from the fund.
The final payment under the US-Libya Claims Settlement Agreement is a major step towards improving ties between the two former political enemies, which began easing after Tripoli halted its arms programmes in 2003.
George Bush, the US president, on Friday signed an executive order restoring the Libyan government's immunity from terrorism-related lawsuits and dismissing pending compensation cases, the White House said.
Libya has sought donations from private businesses to help cover its payments into the fund.
The Bush administration has declared that no money from US taxpayers will be used for the US part of the fund, but has not disclosed where the money will come from.
"American victims and their families have waited decades for Libya to pay for its deadly acts of violence and today they have received long-overdue
Frank Lautenberg, Democratic senator
A delay in the payment of Tripoli's deposit, which had been expected last month, had angered some senators in congress who then refused to lift a block on the nomination of a new US ambassador to Libya and funds for the construction of a new US embassy in Tripoli.
But Frank Lautenberg, a Democratic senator and the main congressional critic of Libya's delay in making the payment, on Friday welcomed the move.
Lautenberg said: "American victims and their families have waited decades for Libya to pay for its deadly acts of violence and today they have received long-overdue
"I am pleased that our relentless pressure ... has led to this historic moment.''
An initial payment to the fund by Libya was received early last month, just days
after the opening of a US trade office in Libya's capital and a visit by Condoleezza Rice, the US secretary of state, marking the first visit by such a high-ranking US official to the country in more than 50 years.
US-Libyan relations hit a low point in the 1980s but improved after Muammar Gaddafi, the Libyan president - who Ronald Reagan, the US president at the time, labelled called the "mad dog of the Middle East'' - renounced "weapons of mass destruction" and acts of terrorism in 2003.
The rapprochement stalled after Libya halted payments to the families of
Lockerbie victims under a previous compensation deal, that would have paid $8m to each, and in the absence of an agreement on the disco bombing in Berlin.
But it improved in August after Libya and Washington agreed to a comprehensive deal covering compensation for all the 1980s-era claims.
The developments come amid a huge increase in interest from US companies, particularly in the energy sector, in doing business in Libya, where European
firms have had much greater access in recent years.
Libya's proven oil reserves are the world's ninth-largest, believed to be close to 39 billion barrels, and vast areas of the country remain unexplored for new deposits.
All 269 passengers and crew, including 180 Americans, on the Pan Am aircraft and 11 people on the ground were killed in the Lockerbie bombing.
Three people, including two US soldiers, were killed and 230 wounded in the
Berlin disco attack.
Reagan subsequently ordered airstrikes on targets in Tripoli and Benghazi that Libyans say killed 41 people, including Gadhafi's adopted daughter.