Libyan state oil company NOC said on Monday it had lifted force majeure at the El Sharara oilfield, the country's biggest, which has been closed since December when state guards and tribesmen seized it.
An oil engineer said oil production of the 315,000 barrels a day field was being restarted with a return to regular output expected in the next days, according to NOC.
The resumption brings to an end a stalemate between NOC and eastern military forces, the Libyan National Army (LNA), led by Khalifa Haftar, which had taken control of the field three weeks ago as part of a southern offensive.
The LNA had called on NOC to reopen the field but its Chairman Mustafa Sanalla had demanded that first all armed groups leave the field.
NOC said on Monday that Sharara's' operating company Akakus had received written assurance from the LNA that all individuals subject to Public Prosecutor arrest warrants have been removed from the field and will not be re-admitted to the site.
Plans are also in place to repair the 20,000 barrels per day lost production capacity destroyed by looting and vandalism during the blockade, NOC said in a statement.
The closure of the field caused a production loss of US$1.8 billion (£1.3 billion), it said.
The reopening of the field strengthens the position of Haftar and the LNA which already controls eastern oilfields and ports. El Sharara had been formally under the control of groups allied to the U.N.-backed administration in Tripoli.
The LNA has taken of much of the south in past two weeks, expanding from its power base in the east.
The restart of the field also underlines the role of the United Arab Emirates in Libya. Last week, the UAE had hosted a meeting between Sanalla and the Tripoli Prime Minister Fayez al-Serraj aimed at persuading NOC to reopen the field, according to diplomats. The UAE is also the main backer of Haftar.