After several delays, due to French threats of a veto unless Libya increased compensation for a separate airliner bombing, the deal was agreed with 13 votes in favour, none against, and two abstentions from France and the US.
Some of the Lockerbie victims' relatives were at the UN in New York to see the vote.
The resolution to lift the arms embargo and ban on flights to Libya was more symbolic than substantive.
The sanctions had been indefinitely suspended for more than four years, since Libya handed over two indicted men for trial in 1999.
A Scottish court convicted one Libyan intelligence agent of the bombing in 2001 and sentenced him to life. The other was acquitted.
Yesterday's move may, however, encourage firms to make long-term plans to do business with Libya. In the capital, Tripoli, the move is also seen as an important step towards shaking off Libya's status as a "rogue" state. Its leader, Muammar Gadafi, is keen to restore his nation's standing in the international community.
Britain had pushed to lift sanctions, and the foreign secretary, Jack Straw, yesterday welcomed the decision. Libya had accepted the security council's demands to "accept responsibility for the horrendous Lockerbie bombing in 1988, the worst terrorist incident on UK territory", he said.
"I know that today's settlement cannot in any way make up for the terrible personal losses suffered by the relatives of those who were killed," Mr Straw said. "But I hope that it will bring some comfort for the pain they have endured." While the US did not block the vote, the state department said its sanctions against Libya remained because of what it alleges are the country's human rights violations, its role in perpetuating regional conflicts, and its pursuit of weapons of mass destruction.
If the US were to lift its sanctions, unlikely in the current climate, the families will each receive another $4m. If Libya is removed from the state department's list of terror sponsors, they will get an additional $2m - a total of $10m for each family. If the US does not lift its sanctions within eight months, the families will receive only $1m more, or $5m per victim.
Opinion in Washington is divided. Neo-conservatives would prefer to keep up the pressure even if it means less compensation, while business, especially the oil industry, is eager for normalisation.
Yesterday's vote had been postponed for more than three weeks while French families whose relatives were on a UTA flight bombed over the Niger desert in 1989, killing 170, renegotiated a settlement made with Libya in 1999. France settled on $33m for all the families. But, embarrassed when they saw what Lockerbie families were getting, the French demanded more. UTA relatives announced on Thursday an agreement that would lead to a settlement.
US sanctions date back to 1986, when President Ronald Reagan called Colonel Gadafy a "mad dog" and bombed Tripoli. More came in 1996 when the D'Amato act targeted Libya and Iran for alleged support of terrorism and efforts to acquire weapons of mass destruction. In 2001 the act was renewed until 2006.
