The Libyan leader, Colonel Muammar Gaddafi, has admitted that his country was developing weapons of mass destruction, but has pledged to dismantle its secret programme.
The British Prime Minister, Tony Blair, described the decision as historic and courageous.
He also confirmed that Britain had been engaged in talks with Libya on the issue since March.
The British Foreign Minister, Jack Straw, also praised Libya's announcement, saying the Libyan leader had shown courage and statesmanship.
He said the full extent of Libya's nuclear and chemical weapons projects had emerged during nine months of secret negotiations.
Libya had been close to developing a nuclear capability. Mr Straw said all nations should show the same openness expressed by Libya.
The US President, George W Bush, praised the decision as beneficial to world peace and the security of the United States.
International forces will now go into Libya to assist with the dismantling process, which could take years.
