A report coming out of Libya says a nuclear power agreement with the United States will be signed shortly.
Libya wants to use nuclear energy to tackle projected water shortages
Libya's official news agency says the US will help build a nuclear power plant for electricity and civil uses.
An anonymous US official downplayed developments. There has been no confirmation from Washington. Relations have improved in recent years.
Libya's leader said recently that Libya was not adequately compensated for ending its nuclear weapons programme.
Muammar al-Gaddafi told the BBC earlier this month that the US and Britain had a duty to help Libya develop civilian nuclear power plants.
Sanctions were lifted after Libya ended its nuclear weapons programme in 2003, and the US and UK have resumed diplomatic ties.
Libya was also removed from the US list of state sponsors of terror, a major step towards international rehabilitation.
Last year, Libya and France signed an accord for the peaceful use of nuclear energy.
"The agreement aims at establishing a nuclear station in Libya to produce electricity, desalting water, and developing the radiochemistry performance at energy researches centre," Libya's official Jana news agency reports.
But a US official told Reuters news agency that the Jana report "vastly overstates things".
"What we said to the Libyans after they got rid of their nuclear weapons effort (was) we'd be open to talking to them about some aspects of civilian uses of nuclear power," the official said on condition of anonymity.