Italy is to provide billions of dollars to Libya as part of a deal to resolve colonial-era disputes, Italian PM Silvio Berlusconi has announced.
At least $5bn will go to help Libyan infrastructure projects over the next 25 years.
Mr Berlusconi is in the port of Benghazi to meet Libyan leader Col Muammar Gaddafi and seal a bilateral friendship and cooperation accord.
Libya was occupied by Italy in 1911 before becoming a colony in the 1930s.
It became independent in 1951.
Mr Berlusconi said: “The accord will provide for $200m a year over the next 25 years through investments in infrastructure projects in Libya.”
The main project will be a coastal motorway between the Egyptian and Tunisian borders.
There will also be a colonial-era mine clearing project.
The Italian leader had earlier said he wanted the agreement to “turn the page on the past”.
Rome and Tripoli have spent years arguing over compensation for the colonial period.
Libya has accused Italy of killing thousands of its citizens and expelling thousands more from their homes in three decades of occupation.
Mr Berlusconi’s trip is his second since June when illegal immigration from Africa to Europe was the key issue of talks.
Italy has been swamped by thousands of African migrants trying to reach its shores by boat.
Libya has come in from the diplomatic cold since 2003 when it abandoned efforts to acquire weapons of mass destruction.
Next week, US Secretary of State Condoleezza Rice is scheduled to make the first high-ranking American visit to Libya since 1953.