Libya has a "historic opportunity" to build a state where human rights and fundamental freedoms are protected, William Hague said as the UN voted to lift the no-fly zone.
The allied military action that began on March 17 to protect Libyan civilians will finish next Monday after a unanimous vote by the UN Security Council today.
The Foreign Secretary described the new resolution as "another significant milestone towards a peaceful, democratic future for Libya".
He said: "Ending the no-fly zone and the civilian protection provisions demonstrates that Libya has entered a new era.
"The resolution reiterates that the Libyan authorities have a duty to uphold human rights and must prevent reprisals and revenge attacks...
"This is vital; a commitment to democracy, good governance and rule of law must be at the heart of the current transitional period."
UN Security Council Resolution 2016 ends the UN authorisation for military action just before midnight on October 31, which means that Libya will regain control of its airspace and all military operations from November 1.
Mr Hague said: "We now look forward to the creation of an inclusive, representative Transitional Government in Libya and to a new era in UK-Libya relations.
"Libya has a historic opportunity to create a state where human rights are protected and all people enjoy fundamental freedoms.
"This would be a fitting tribute to those who sacrificed their lives for future generations."
His comments came after a British military chief said the UK was battling to prevent thousands of Muammar Gaddafi's deadly surface-to-air missiles ending up in "the wrong hands".
The toppled dictator is known to have invested in a large supply of man-portable air defence systems, known as manpads, and it is now feared they could flood the black market following the collapse of his regime.
Air Marshal Sir Stuart Peach, Britain's commander of joint operations, warned there was "always a risk of proliferation of such weapons" and admitted it was not known exactly how many were out there.
Addressing the question of what arms could be used or sold on by the wrong people, he said: "We're still trying to work that out and get to the bottom of what might be there.
"We knew at the start the Gaddafi regime had invested heavily in manpads. The proliferation of portable weapons that are lethal is almost strategic in itself.
"We have to be careful about in whose hands these end up."
Britain would do whatever it could to "get these wicked things out the way", he added.
"We're on the case and we're working with the Libyan government to do something about it because these weapons in the wrong hands are lethal."
The possibility of Taliban or al Qaida members getting hold of the missiles was not ruled out.
"As far as which group or who might get them - the whole proliferation of arms is a pretty murky business," Air Marshal Peach said.
"We're taking this really seriously and will do what we can, working with our allies, to make sure this risk is not materialised."
The Ministry of Defence (MoD) said it had been working since last month to try to prevent the proliferation of manpads.
A spokesman said: "A team of British experts has been working alongside Libyan and US colleagues since September to identify, secure and destroy man-portable air defence systems.
"Over 800 bunkers have already been inspected by teams across Libya and the UK has provided around £1.5 million to support this vital counter-proliferation work."
Manpads are commonly sought after by insurgent groups because of their effectiveness against attack helicopters and other aircraft used in counter-insurgency campaigns.
They are also easy to carry around and relatively straightforward to use.
Speaking at an MoD briefing on the Libya operation, Air Marshal Peach indicated that Britain's role in the north African country following the rebels' victory was yet to be determined.
The question of whether British military advisers will remain there in the future was a "policy question to be debated by the National Security Council", he said.
He went on: "It's very much now governed by the Libyan government and their request to us, which is not yet clear.
"We don't know yet what they want."
The aim of British forces throughout their involvement in Libya was to minimise the number of civilian casualties, he went on.
But he added: "To say there were none would be a big call".
Overall, however, he offered a resoundingly positive assessment of the mission.
Celebrating the successful deployment of British arms, he said: "The use of some of our weapons has been world class."