Libya signed a compensation accord worth $170 million on Friday with families of victims of a 1989 French passenger jet bombing, bringing closure to years of grief.
The deal also should open the way to a new era of ties between Tripoli and Paris.
The agreement was signed between a representative of families of victims of the attack, Guillaume Denoix de Saint Marc, and the director of a Libyan foundation, Saleh Abdul Salam.
A bank handling the transfer of funds and SOS-Attentat, a group which works for terrorism victims' rights, also signed the private deal.
The Sept.19, 1989, bombing of an UTA airlines jet flight over the Niger desert killed all 170 people aboard. Victims' families came from 17 countries, but France, with 54 dead, had the heaviest casualties.
"There is a bit of general euphoria linked to the end of enormous negotiations, the end of 14, nearly 15 years of grieving," Denoix de Saint Marc told Associated Press Television News ahead of the signing.
He said that families were "satisfied" with the terms of the accord, not immediately disclosed in full.
"The Libyan government has finally recovered its honor," he added.
Denoix de Saint Marc lost his father in the bombing for which six Libyans -- including a brother-in-law of Gadhafi -- were convicted in absentia by a French court. They remain at large.
A special foundation was being set up to distribute funds, not expected to start flowing for six months. However, a check for a quarter of the sum -- $42.5 million -- was being handed over Friday, Denoix de Saint Marc said.
Applause broke out after numerous papers were signed to seal the private accord between families of victims and Gadhafi International Association for Charitable Organizations.
An accord in principle was signed in September that cleared the path for the international community to lift 11-year-old sanctions against Libya. However, a fall deadline for a final accord had passed without progress.
While the deal is private, France has stood in the wings overseeing developments.
The arrival in Paris on Thursday of Libyan Foreign Minister Abdel-Rahman Shalqam underscored that the impact of the accord would also be felt in the diplomatic arena.
The Libyan minister was to meet separately later Friday with President Jacques Chirac and his French counterpart, Dominique de Villepin.
The agreement is a follow-up to the $33 million Libya paid in the case in a 1999 deal.
Grieving families sought increased compensation once Libya agreed to pay a far higher sum -- $2.7 billion -- to relatives of the 270 victims of the 1988 downing of a Pan Am jet over Lockerbie, Scotland.
Also sharing in the indemnities were families of victims from elsewhere, including the 40 victims from Congo and seven from the United States which included a U.S. ambassadors wife.
While neither France nor Libya is officially involved in the compensation deal, French authorities have made clear that an agreement would help open the way to a new era in ties.
The pact would be the latest overture by Libya to throw off its image as a rogue state and return to the good graces of Europe and the United States. Gadhafi last month abruptly renounced efforts to build weapons of mass destruction and opened his country's arms production facilities to international inspection.