President George W. Bush has decided to allow US companies to resume most trade with Libya and buy Libyan oil to reward Tripoli for giving up weapons of mass destruction.
Mr Bush is also poised to terminate the Iran-Libya Sanctions Act's provisions on Libya that allow him to punish non-US firms that invest more than $20 million a year in the North African nation's energy sector.
The moves reflect a desire to reward Tripoli for its landmark announcement last December that it would give up the pursuit of nuclear, chemical and biological weapons and what Washington has called its "excellent" work to eliminate them since then.
"This is WMD related," said one US official.
The US officials, who spoke on condition that they not be named, said some US sanctions will stay in place: Libyan government assets in the United States will remain frozen and air travel and aviation cooperation will still be restricted.
Libya will also remain on the US list of "state sponsors of terrorism," which bars it from receiving US arms exports, controls sales of "dual-use" items with military and civilian applications, limits US aid and requires Washington to vote against loans from international financial institutions.
The officials said Mr Bush had made the decision to ease the other sanctions - which remove the main obstacles to US trade with Libya - but had not signed the papers, meaning an announcement could occur tomorrow or possibly next week. However, in one sign that an announcement is imminent, the US officials said the Bush administration was to begin briefing members of Congress on its decision today.
The dramatic improvement in US-Libyan relations began last August, when Tripoli took responsibility for the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, that killed all 259 people aboard and 11 people on the ground.
It was not clear whether Bush's moves will be sufficient to trigger additional compensation payments to the Lockerbie families under a deal in which they can receive up to $10 million per victim depending on the lifting of sanctions.