Libya has said it will give up its programmes for developing weapons of mass destruction and allow unconditional
Gaddafi's government negotiated with the US and UK
President Muammar Gaddafi said that, after months of negotiations with the West, his country was ready to play its role in building a world free from all forms of terrorism,
Friday's surprise statement drew immediate praise from Washington and London.
UK Prime Minister Tony Blair called the announcement "an historic one and a courageous one".
US President George Bush said: "Colonel Gaddafi's's commitment, once fulfilled, will make our country more safe and our world more peaceful."
"Leaders who abandon the pursuit of biological, chemical and nuclear weapons and the means to deliver them will find an open path to better relations with the US and other nations."
The US and its allies have long suspected that Libya had secret chemical and biological weapons programmes, but Libya repeatedly denied such allegations saying it only had facilities for pharmaceutical or agricultural research.
In 1995, the country reopened its Rabta pharmaceutical plant at Qabilat az Zaribah which, prior to its 1990 closure, had produced up to 100 tons of chemical weapons, according to the US.
But chemical weapons production at Libya's underground Tarhuna facility is thought to have been suspended following intense international scrutiny.
UK officials believe Libya was close to obtaining a nuclear weapons capability before the deal.
Libya says it has now agreed to immediate international monitoring of its facilities.
Tripoli also promised to negotiate a new deal with the United Nation's nuclear agency and provide guarantees on biological weapons.
Mr Blair said Britain had been engaged in talks with Libya for nine months.
""Libya came to us in March following successful negotiations on Lockerbie to see if it could resolve its weapons of mass destruction issue in a similarly co-operative manner," he said.
Tony Blair applauded the move
Friday's decision entitled Libya to rejoin the international community, Mr Blair said.
"It shows that problems of proliferation can, with good will, be tackled through discussion and engagement, to be followed up by the responsible international agencies.
"It demonstrates that countries can abandon programmes voluntarily and peacefully."
Mr Blair contrasted Libya's voluntary relinquishment of weapons of mass destruction with Iraq's defiance, which led to military action and the toppling of leader Saddam Hussein.
During three weeks in October and early December, a team of experts from Britain and the US had visited Libya and gained access to projects, including uranium enrichment, under way at more than 10 sites.
The team had also been shown "significant quantities" of chemical agent and bombs designed to carry it, British officials said.
The Libyan Government said it had shown the experts equipment that could have been used to develop "internationally banned weapons".
It said it had now decided to abandon the programme of its own "free will " and to admit weapons inspectors.
Libya called on other countries to follow its lead.
It said: "By taking this initiative, (Libya) wants all countries to follow its steps, starting with the Middle East, without any exception or double standards."
BBC world affairs editor John Simpson says Libya has not been at the centre of the war on terror, but has always been regarded as a "friend of terrorists" - and had, for example, helped the IRA in the 1970s.
BBC Jerusalem correspondent James Reynolds said Israel would be "surprised and relieved" by the announcement.
"Israel's main hope will be that the announcement puts additional pressure on Iran."
But he added: "It may also refocus attention on Israel's own nuclear weapons programme."