US President George W Bush on Monday telephoned Libyan leader Moamer Gaddafi in a sign of warmer ties following an agreement to compensate victims of terrorism, dpa reported.
"The two leaders discussed that this agreement should help to bring a painful chapter in the history between our two countries closer to closure," Gordon Johndroe, a White House spokesman, said.
The US government confirmed earlier this month that 1.5 billion dollars had been transferred by Libya into a fund to compensate victims or their families for terrorist attacks.
The fund covers the 1988 bombing of a Pan Am jetliner over Lockerbie, Scotland and the 1986 bombing in a Berlin disco that killed two US soldiers.
Bush's phone call was the first conversation between a US president and Gaddafi in decades. The United States regarded Tripoli as a backer of international terrorism and cut off relations after the sacking of the US embassy in 1979.
Relations worsened after president Ronald Reagan ordered airstrikes against Libyan targets in retaliation for the disco bombing in 1986. Libya eventually took responsibility for the Lockerbie bombing that killed 270 people.
More than 25 years of hostility began easing after Libya agreed to abandon weapons of mass destruction programmes following the invasion of Iraq and agreed to compensate the victims of the attacks.
"Libya has taken important steps on the road to normalizing its relations with the international community, beginning with its renunciation in 2003 of terrorism and weapons of mass destruction," Johndroe said.
The United States removed Libya from a terrorist blacklist and in 2006 restored diplomatic relations. US Secretary of State Condoleezza Rice became the first top US diplomat to visit Libya in more than 50 years.