The EU has agreed to lift its embargo on the sale of arms to Libya, after pressure from the Italian government.
The move is a reward for Libya giving up its WMD programme
Italy wants Libya to patrol its coastline more effectively and catch the hundreds of illegal migrants who try to reach Europe by sea each month.
The United States lifted its trade embargo on Libya earlier this week.
EU officials say a formal decision to lift the embargo, which was imposed 18 years ago, would be taken by the union's ministers next month.
Italian Foreign Minister Franco Frattini "has expressed his great satisfaction with the agreement reached today in Brussels to completely lift the European Union embargo imposed on Libya", the ministry said in a statement.
"The EU's decision caps off ongoing efforts by Italy to give Libya the tools needed to assure an efficient patrolling of its land and marine borders and adequately confront the illegal immigration phenomenon and crime," it added.
Italy's interior ministry had said that more than 9,700 illegal immigrants, many from North Africa, had arrived on its shores so far this year.
It called for the EU to allow exports to Libya of equipment, such as binoculars and boats, to help the country tackle the problem.
The EU and the US imposed trade sanctions on Libya in 1986 in retaliation for what they saw as Libyan support for terrorist groups.
US and European relations with Libya have improved since Tripoli pledged to compensate families of victims of the Lockerbie and UTA air crashes.
Members of the EU, like the US, are keen to invest in Libya's substantial oil reserves.
Washington lifted its sanctions against Tripoli on Monday as a reward for giving up weapons of mass destruction.
President George W Bush formally revoked all remaining trade sanctions, which affected general trade, aviation and the importing of Libyan oil.
The embargo had been suspended since April.
A freeze on Libyan assets in the US was also been lifted.
Libya had threatened to cancel compensation payments if the sanctions had not been lifted by Wednesday.