Libya has started making payments into a fund to compensate the families of American victims of Libyan-linked terror attacks in the 1980s, another step in the full normalization of long-strained ties between Washington and Tripoli, a senior U.S. official said Thursday.

The "substantial amount" deposited into a U.S. bank account is not the full amount needed to fulfill a compensation agreement reached earlier this year, but the official said it demonstrated Libya's willingness to resolve outstanding claims, particularly over the 1988 Pan Am 103 bombing over Lockerbie, Scotland, and the 1986 bombing of a German disco.

The exact amount of the package has never been made public, but it is believed to be in the range of hundreds of millions of dollars.

"We believe that direct deposit of these funds ... is evidence of Libya's commitment to fully implementing the claims settlement agreement," the official told reporters on condition of anonymity ahead of a formal announcement.

"This initial deposit to implement the claims agreement demonstrates Libya's commitment to fully resolving outstanding claims," the official said. "We will continue to work with Libya to ensure the expeditious receipt of the remaining agreed funds to compensate the victims and families."

The official would not quantify the amount of the payment or say whether it had been deposited by the Libyan government or private Libyan entities that have paid similar compensation in the past.

Under the agreement, the Bush administration pledged to restore the Libyan government's immunity from terror-related lawsuits and dismiss pending cases, but the official stressed that it is not obligated to do so until the full compensation is paid.

The first payment had been expected in early September but was inexplicably delayed.

It was received just days after the opening of a U.S. commercial office in Libya's capital and a historic visit there last month by Secretary of State Condoleezza Rice, who was the highest-ranking U.S. official to visit the country in more than 50 years.

U.S.-Libyan relations hit a low point in the 1980s but began to improve after Libyan leader Moammar Gadhafi — whom President Reagan called the "mad dog of the Middle East" — renounced weapons of mass destruction and terrorism in 2003.

The rapprochement stalled after Libya halted payments to the families of Lockerbie victims under a previous compensation deal and in the absence of an agreement on the La Belle disco bombing in Berlin.

But it picked up again in August when Libya and the United States agreed to a new, comprehensive compensation package for both U.S. and Libyan victims of 1980s-era attacks.

All 269 passengers and crew, including 180 Americans, on the Pan Am flight and 11 people on the ground were killed in the Lockerbie bombing. Three people, including two American soldiers, were killed and 230 wounded in the Berlin disco attack. That attack prompted Reagan to order airstrikes on targets in Tripoli and Benghazi that Libyans say killed 41 people, including Gadhafi's adopted daughter.

Numerous lawsuits have been filed in both countries seeking damages for the attacks, and the settlement scheme is intended to satisfy all U.S. and Libyan claims. No U.S. taxpayer money will be used to compensate the Libyan families, officials say.

The developments come amid a huge increase in interest from U.S. firms, particularly in the energy sector, to do business in Libya, where European companies have had much greater access in recent years. Libya's proven oil reserves are the ninth largest in the world, close to 39 billion barrels, and vast areas remain unexplored for new deposits.