In public, senior Ministers from the last Labour Government and the Scottish First Minister have repeatedly insisted that terminally ill Abdelbaset Al Megrahi was freed on compassionate grounds in a decision taken by Scottish Ministers alone.
But the confidential papers show that Westminster buckled under pressure from Colonel Gaddafi, who threatened to ignite a 'holy war' if Megrahi died in his Scottish cell.
And despite repeated denials, the Labour Government worked frantically behind the scenes to appease Gaddafi's 'unpredictable nature'.
As recently as last month, a spokesman for Scotland's First Minister Alex Salmond was insisting: 'The decision was taken on the basis of Scots law and was not influenced by economic, political or diplomatic factors.'
Equally damaging, the documents also suggest that as well as sharing intelligence-gathering techniques, Britain gave Libya hundreds of suggested questions for Islamic militants detained in Libya in 2004.
This will inevitably cause widespread dismay because of the regime’s systematic use of torture during interrogation. Read MoreThe incriminating documents were found in the wreckage of the British ambassador’s home in Tripoli, a three-storey house vandalised in April by Gaddafi loyalists.
There were several booklets filled with the faces of suspected terrorists, scores of personally signed letters sent from Downing Street and detailed intelligence data on the Gaddafi regime.
Incredibly, all this had lain amid the debris for four months, with no attempt made to secure the papers even in
the week after the rebels ousted the dictator from the city.
Mountains of shredded paper showed British diplomats tried to destroy many documents before fleeing.
One of the more intriguing proposals in the papers is the idea of founding a Centre for the Study of Meteors and Shooting Stars in the middle of the Saharan desert.
Hundreds of meteorites have been found in the Libyan desert, including rocks from the Moon and Mars.