Libya has emerged from its pariah status in recent years
France and Libya have signed agreements on issues including security, health care and immigration during talks between the two countries' leaders.
French President Nicolas Sarkozy met Libyan leader Muammar Gaddafi in Tripoli a day after the release of six Bulgarian medics.
The six were convicted of deliberately infecting Libyan children with HIV.
The two leaders also agreed to work on a nuclear energy project that will turn sea water into clean drinking water.
Their meeting is being seen as a sign of the normalisation of ties between Libya and the EU following the medics' release.
The EU and the United States had made it clear to Mr Gaddafi that resolving the medics' situation was key to improving relations.
Libya began to emerge from its pariah status in 2003 after Mr Gaddafi gave up Libya's nuclear weapons programme, says the BBC's Rana Jawad in Tripoli.
Libya also accepted responsibility for the 1988 bombing of an airliner over Lockerbie, Scotland, which killed 270 people, and agreed to pay compensation to the victims' families.
Since then, international sanctions against the country have been gradually lifted.
The medics were greeted in Bulgaria by tearful relatives
"The objective is to co-operate so as to work on the installation in Libya of a nuclear reactor to supply drinking water from desalinated sea water," said Claude Gueant, an aide to Mr Sarkozy.
US Secretary of State Condoleezza Rice said she hoped to visit Libya soon and signalled that US investment there could increase.
"I know that American companies are very interested in working in Libya," she said in Washington.
The six medics - including a Palestinian-born doctor granted Bulgarian citizenship last month - had been held for eight years after being accused of deliberately infecting 438 children with HIV-tainted blood at a hospital in Benghazi.
They always maintained their innocence.
Each of the families involved is reported to have received $1m (£500,000) per child in compensation as part of a settlement.
Under that deal the original death sentences imposed on the medics were commuted to life imprisonment.
The medics' release was made possible by a deal struck in Tripoli on improving Libya-EU ties, following years of negotiations.
Both Mr Sarkozy, the French president, and his wife Cecilia were also involved in the final negotiations. He is the first European head of state to visit Libya since the release.
The medics were pardoned on their arrival in Bulgaria by the president, but the children's families have demanded that they be re-arrested.
In a statement, the Libyan Association for the Families of HIV-infected Children condemned the release and pardoning of the medical workers as absurd and disrespectful.
The six, who had been in prison since 1999, say their confessions to infecting the children were forced from them by torture.