The US praised Col. Qadhafi's anti-terrorism cooperation

"We are taking these actions in recognition of Libya's continued commitment to its renunciation of terrorism," Secretary of State Condoleezza Rice said in a statement on Monday.

Tripoli's cooperation in combating international terrorism had been "excellent", Rice added.

Libya for its part has welcomed the move as being in both countries' "mutual interest".

The United States has not had formal diplomat relations with Libya since 1980, although a thaw in long-standing hostilities led to Washington opening a diplomatic office in Tripoli in 2004.

Commenting on the move Abdurrahman Shalgham, the Libyan foreign minister, said the decision would "certainly open a new chapter in the relations of the two countries."

Speaking to the Associated Press, Shalgam said the decision was "a result of contacts and negotiations. It is not unilateral. It is a result of mutual interests, agreements and understandings."

Asked if the US decision was an incentive for Libya to further cooperate with the United States, he said: "In politics there is no such thing as a reward but there are interests."

Weapons of mass destruction

Libya agreed to pay compensation to families of Lockerbie victims

Removing Libya from the list of countries the United States considers state sponsors of terrorism means a 45-day public comment period will begin on Monday, after which Libya would be removed from the list.

Libya was held responsible for the bombing of Pan Am flight 103 in 1988, which claimed 270 lives, most of them American.

The restoration of ties culminates a process that began three years ago, when Libyan leader Colonel Muammar al-Qadhafi surprised the world by agreeing to dismantle his country's weapons of mass destruction programs.

"As a direct result of those decisions we have witnessed the beginning of that country's re-emergence into the mainstream of the international community," Rice said.

"Today marks the opening of a new era in US-Libya relations that will benefit Americans and Libyans alike."

However, a spokesman for the Libyan opposition in exile denounced the US move as "unfortunate."

"This doesn't help the Libyan people who are looking for international assistance to achieve their human rights," said Fayez Jibril of the Libyan National Congress.

"Col. Qadhafi will most certainly use this to tighten his hold on the Libyans who aspire for such simple things such as freedom of expression and freedom to have a constitution," Jibril said from his exile in neighboring Egypt.

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