Libyan leader Moammar Gadhafi, right, meets U.S. Secretary of State Condoleezza Rice, left, Friday in Tripoli, Libya. Rice began a four-nation tour of North Africa in Tripoli, meeting Gadhafi and other top officials in what the state department is calling a landmark trip that will symbolize the opening of a new era in ties between the United States and the oil-rich country.

Tripoli, Libya ? The United States and Libya sealed a historic turnaround after decades of terrorist killings, American retaliation, suspicions and insults with Secretary of State Condoleezza Rice’s peacemaking visit Friday with Moammar Gadhafi, Libya’s mercurial strongman.

“The relationship has been moving in a good direction for a number of years now, and I think tonight does mark a new phase,” Rice said following a traditional Muslim dinner – the evening meal that breaks the day’s fast during the holy month of Ramadan – at Gadhafi’s official Bab el-Azizia residence. It is the same compound hit by U.S. airstrikes in 1986 in retaliation for a deadly Libyan-linked terrorist attack in Germany. The attack killed Gadhafi’s baby daughter.

“We talked about the importance of moving forward,” Rice said. “The United States, I’ve said many times, doesn’t have any permanent enemies.”

‘Forget the past’

Rice is the highest-ranking American official to visit Libya in a half-century. The United States considers Gadhafi rehabilitated since the days when President Reagan called him the “mad dog of the Middle East,” because of the Libyan’s surprise decision in 2003 to renounce terrorism and give up weapons of mass destruction.

His government has also agreed to resolve legal claims from the bombing of Pan Am Flight 103 and other alleged terror attacks that bore Libyan fingerprints.

“Libya has changed, American has changed, the world has changed,” Foreign Minister Abdel-Rahman Shalgam said following a meeting with Rice. “Forget the past.”

Gadhafi welcomed Rice in a room redolent of incense. Wearing white robes, his fez and a green pin of Africa, Gadhafi bowed and put his right hand over his heart in a traditional Arab greeting.

Their small talk belied almost 30 years of dismal U.S.-Libyan relations that hit their low point in the 1980s when Reagan ordered the retaliatory airstrike and Gadhafi swore revenge.

Washington cut off diplomatic relations with Libya after a mob sacked and burned the American Embassy in 1979.

Gadhafi is known for often unpredictable behavior and has cultivated images as both an Arab potentate and African monarch since taking power in a 1969 coup. In an interview with Al-Jazeera television last year, Gadhafi spoke of Rice in most unusual terms, calling her “Leezza” and suggesting that she actually runs the Arab world with which he has had severe differences in the past.

Rice’s visit comes amid a surge in interest from U.S. companies, particularly in the energy sector, to do business in Libya.