British Prime Minister Mr Tony Blair sealed Libya's return to the international fold today with an historic handshake with Colonel Gadafy and an agreement to fight al-Qaeda together.
After more than an hour of talks, Mr Blair said Libya's rejection of banned weapons and rapprochement with the West could act as a template for other Arab nations to turn their back on Islamic extremism.
"We are showing by our engagement with Libya today that it is possible for countries in the Arab world to work with the United States and the UK to defeat the common enemy of extremist fanatical terrorism driven by al-Qaeda," he told reporters.
"It is a very, very important signal for the whole of the Arab world."
On the first visit to Libya by a British leader since 1943, Mr Blair was whisked to a ceremonial tent outside Tripoli to meet the Libyan leader once condemned by former US president Ronald Reagan as the "mad dog of the Middle East".
Mr Blair said Col Gadafy recognised "a common cause with us in the fight against al-Qaeda, extremism and terrorism, which threatens not just the western world but the Arab world also".
The British Prime Minister promised not to forget "the pain of past actions" after the 1988 Lockerbie bombing which killed 270 people but said Libya should be welcomed back into the international fold.
Gains to British business from the diplomatic thaw were being seen up even before Mr Blair arrived. A British official on Mr Blair's plane said oil giant Royal Dutch/Shell had won a $200 million gas exploration deal with Libya.
Mr Blair announced that defence contractor BAE Systems would also clinch a major Libyan deal shortly and that a trade mission would visit Tripoli in April.