France is to compensate thousands of Algerian veterans who fought against their countrymen to preserve French colonial rule in Algeria.
The French were aided by hundreds of thousands of Algerian fighters
President Nicolas Sarkozy said France owed "reparation" to the fighters, known as harkis, for its "ingratitude".
Some harkis' associations welcomed the move, others said it was inadequate.
Some 200,000 harkis fought in Algeria. Those who eventually fled to France suffered discrimination. Those who stayed were punished as traitors.
The Algerian forces of the National Liberation Front (FLN) are estimated to have killed between 30,000 and 150,000 harkis towards the end of the war.
The FLN's victory in the 1954-1962 conflict ended France's 132-year colonial hold over Algeria.
Internment and discrimination
President Sarkozy pledged to compensate the harkis after returning from a trip to Algeria.
Nicolas Sarkozy has asked his PM to organise compensation
"To all the harkis toward whom France has a debt, I say in the name of the nation that France owes them reparation," he said.
"We must put right the mistakes that were committed."
Details were not given, but Mr Sarkozy said he had asked the prime minister to produce a financial package compensating the harkis.
He said funds would be allocated for the education, housing and employment of the Algerian veterans and their families.
The harkis who fled to France were initially interned in camps.
Though promised help in integrating into French society, they were instead moved to deprived housing estates, where many of their descendants remain to this day.
Abellatif Moussa, the head of an organisation for the children of harkis, said Mr Sarkozy had done well to soften attitudes and pledge aid, Reuters news agency reports.
The French occupation of Algeria ended in 1962
Other groups criticised the president for not going far enough.
"We were waiting for the recognition of French responsibility in the abandonment and relegation of harkis," Said Merabti, president of the AJIR group, told Reuters.
Former French President Jacques Chirac placed a plaque honouring the harkis at the site of Napoleon's tomb in 2001.
However, they are still scorned in Algeria, where President Abdelaziz Bouteflika has described them as "collaborators".
Mr Sarkozy sealed several business deals involving French firms on his latest trip to Algeria.
He spoke of French colonial rule in the North African country as "unjust by nature", but stopped short of offering the full apology many Algerians had called for.