Silvio Berlusconi, Italy's prime minister, who greeted Gaddafi on his arrival, has invited the Libyan leader to return to Italy next month for the Group of Eight summit.
On his arrival in Rome, Gaddafi escorted down the steps of his plane Mohammed Omar al-Mukhtar, the son of Omar al-Mukhtar, a Libyan national hero who was executed by Italian colonial authorities for leading an uprising against the Italians in the 1920s and 1930s.
Pinned to Gaddafi's uniform was a faded, black-and-white photo of the late hero chained by his Italian captors.
Last year, Italy agreed to compensate Libya for the hardships suffered under Italian occupation with a $5bn package of construction projects, student grants and pensions for Libyan soldiers who served with the Italians during World War II.
After meeting Giorgio Napolitano, Italy's president, Gaddafi said: "We hail this generation of Italians for having resolved with extreme courage the questions of the past."
In return for Italy's investment, Libya agreed to crack down on the thousands of illegal migrants smuggled each year across the Mediterranean to Italy, although waves of boats keep arriving, often reaching the tiny Sicilian island of Lampedusa.
Italy has rejected criticism by the United Nations, the Vatican and human rights organisations over its decision in May to return to Libya 227 would-be migrants picked up off its shores.
Critics say the practice violates migrants' rights since they cannot apply for asylum in Italy.
Stefano Pedica, a senator from the opposition Italy of Values party, said: "It's shameful to open up the hall of the Senate to someone who doesn't know what human rights are."
Giovanna Ortu, who heads an association of Italians expelled in 1970 from the North African country, said they would meet Gaddafi on Saturday in a tent that has been erected for him in the capital's Doria Pamphili park.
The association wants millions of dollars in compensation for seized assets.
Gaddafi was also scheduled to meet Jews who were among 6,000 expelled from Libya in an anti-Jewish backlash after Israel's victory in the 1967 Middle East war.
Riccardo Pacifici, the head of Rome's Jewish community, questioned Gaddafi's sincerity, noting that the proposed meeting on Saturday morning falls on the Jewish Sabbath, making it impossible for observant Jews to participate.
Libya supplies a quarter of Italy's oil and is a source of much-needed capital for Italian companies amid the global financial crisis.