A man who was wrongly accused of training the September 11 attackers will be given compensation, the Ministry of Justice confirmed today.
Jack Straw told Algerian Lotfi Raissi he is eligible for a payout and the amount will be decided by independent assessor Lord Brennan QC.
Last month, the Justice Secretary was given 28 days by the Court of Appeal to decide what should happen.
A Ministry of Justice spokesman said: "In accordance with the decisions of the Court of Appeal of February 2008 and March 2010, and after careful consideration of all the relevant material available to him, the Justice Secretary, Jack Straw, has notified Mr Raissi that he is eligible for compensation.
"The Independent Assessor, Lord Brennan QC, will now be asked to consider the amount to be paid to Mr Raissi. Ministers play no part in determining the amount."
Mr Raissi told BBC News it was the best day of his life.
He said: "I'm completely exonerated now by the Minister of Justice and I'm delighted.
"My life was destroyed, my career was destroyed. I can't even find the words.
"It was hell for me and for the last nine years."
He said he hoped he can now "turn the page" and reprise his career as a pilot.
Mr Raissi told the broadcaster the battle to clear his name was "not a question about the compensation".
He said: "I was fighting for justice and what I want at the end of it is an apology."
Mr Raissi was arrested in London after the September 11 attacks, following an extradition request from the FBI.
They claimed he had attended flight training with one of the hijackers, and Mr Raissi spent five months in the high security Belmarsh prison before being granted bail.
He was cleared of any involvement in the plot the following year.
According to his solicitors Tuckers, Mr Raissi wrote to Mr Straw in 2004 asking for compensation as a victim of a miscarriage of justice.
The 36-year-old was denied permission to make a claim by the High Court in 2007, but in February 2008 the Court of Appeal found in his favour.
Tuckers issued a statement from Mr Raissi which said: "Jack Straw has now stated that I am 'completely exonerated' having considered all the evidence. I am delighted. I have waited for this for nine years.
"I hope that this Government statement will help get rid of the cloud of suspicion that has hung over my life for so long. I have asked for a meeting with Jack Straw and hope there will be time before the election."
Mr Raissi's solicitor, Jules Carey, said: "The allegations of terrorism were utterly ruinous to him both personally and professionally. Mr Raissi has fought extremely hard to clear his name.
"I believe that the delay in this announcement is because it has been politically difficult for the Justice Secretary to make it. On March 26 the Court of Appeal ordered the Justice Secretary to make a decision by today.
"I sincerely hope that this will mark a new chapter in his life and that his rehabilitation will begin."
James Welch, legal director at human rights charity Liberty, said: "The shabby treatment of this innocent man is a chilling reminder of why we all need the protection of the courts.
"Now that the Extradition Act 2003 is in force, it is terrifying to think that, were Lotfi Raissi to face the same false accusation today he would be packed off to the US without any consideration by our courts of the strength of the case against him."