US President Barack Obama shook hands warmly on with Libyan leader Muammar Gaddafi, long reviled in Washington.

The landmark handshake took place as leaders from major economic powers and emerging nations prepared to take a group photo at a summit in L'Aquila, central Italy.

Relations between Libya and the US have repeatedly see-sawed over the past 30 years. Diplomatic relations were broken in 1981 and only restored in 2004 after Libya renounced its quest for weapons of mass destruction.

However, relations remain strained mainly over compensation for terrorism victims in the 1980s.

The dispute was put to rest at the end of 2008 when Libya gave $1.5 billion in compensation to US victims of the Lockerbie attack, which caused 270 deaths in 1988, and an attack on a Berlin nightclub where US soldier used to go. Three were killed in that attack.

Mr Obama has triggered a raging debate in the US by saying that Washington should be prepared to speak with its enemies. A handshake with Venezuelan President Hugo Chavez at an international summit in April attracted great attention.

Senior White House official Denis McDonough shrugged off Mr Obama's handshake with Col. Gaddafi, remarking that relations between the two countries had been restored.

"I don't know that he's given much consideration to whose hand he will shake or whose hand he will not shake. I'm confident, knowing the President, that presented with the opportunity to greet any of the leaders, that he'll do that," he said.