European Union foreign ministers have agreed to end sanctions against Libya, including an arms embargo.
Libya's Col Gaddafi has decided to scrap WMD programmes
Italy had argued for the lifting of the 18-year-old arms ban, so that it could supply Libya with hi-tech equipment intended to curb illegal migration.
EU ambassadors decided on 22 September that the sanctions - imposed in 1992 - should be lifted.
But ministers, meeting in Luxembourg, have now gone further in removing the arms embargo, which dates back to 1986.
'Peace and security'
British Foreign Secretary Jack Straw told the BBC the move followed Libya's "complete abandonment of its weapons of mass destruction programme" and its payment of compensation to the victims of Libyan-sponsored bomb attacks.
"This is a very good day... for peace and security across the world," he said.
Mr Straw denied that the EU was giving up its leverage over Libya on human rights, particularly in the case of five Bulgarian and one Palestinian medical workers who have been sentenced to death for spreading HIV.
"In fact," said Mr Straw, "we have gained leverage."
Also at the meeting in Luxembourg:
- Ministers agreed to tighten EU sanctions against Burma's military regime, accused of human rights abuses - they include an EU-wide travel ban on high-ranking Burmese officers
They approved plans to take over peacekeeping operations in Bosnia-Hercegovina from the Nato military alliance on 2 December
- Ministers said they needed more time to consider the future of the EU's arms embargo on China, imposed after the 1989 Tiananmen Square massacre.
Italy has spearheaded diplomatic moves to bring Libya closer to the EU.
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.
It has lobbied for the EU to allow exports to Libya of equipment such as binoculars and boats.
The United States lifted its trade embargo on Libya last month.
The EU and the US imposed sanctions on Libya in 1986 in retaliation for what they saw as Libyan support for terrorist groups.
UN sanctions were imposed in 1992 to force Tripoli to hand over two Libyans indicted for the 1988 bombing of a US airliner over Lockerbie in Scotland.
They were suspended after the two Libyans were handed over for trial in 1999 and then abolished last year after Libya agreed to compensate the families of the 270 victims, as well as those of the 1989 bombing of a French airliner over Niger.
Washington lifted its sanctions against Tripoli as a reward for Col Muammar Gaddafi's decision to scrap weapons of mass destruction.
The BBC's Oana Lungescu in Luxembourg says the EU is very interested in developing economic ties with Libya, Italy's biggest oil supplier.
But the EU wants Libya to improve its very poor human rights record, she adds.
The EU has condemned the continuing house arrest of Burmese human rights activist and Nobel peace prize
winner Aung San Suu Kyi.
It has also demanded an end to harassment of her National League for Democracy and criticised the lack of open debate in a national convention launched by the military regime in May.
Along with the visa ban on officers ranked brigadier-general and above, the EU on Monday approved a ban on investment in state-run enterprises in Burma.