The Royal Air Force is flying 1.8 billion dinars (£950 million) worth of cash to Libya, after the United Nations lifted an assets freeze.
The notes were printed in Britain and will be handed to Libya's central bank.
The cash was released following a decision by the United Nations sanctions committee in New York.
A British official says the transfer should make it possible to pay many public sector workers over the Eid holiday. Many of those on government salaries have not been paid for weeks.
The BBC reports the funds were frozen in February when the uprising in Libya started.
Foreign Secretary William Hague said this move represented another ''major step forward'' in getting necessary assistance to the Libyan people.
Germany has also asked to release about 1 billion euros (£900 million) in seized assets while France wants to unfreeze about 5 billion euros (£4.4 billion) to help pay for humanitarian aid and keep essential services going in Libya.
Last week, the UN agreed to a US request to unblock $US1.5 billion (£1 billion) in frozen Libyan assets.
In March, a ship carrying Libyan currency worth £100 million (200 million dinars) was impounded following an attempt to dock at Tripoli.
The money, which was printed in north-east England, was held at Harwich in Essex.