A Whitehall official said the money should be available to load into cash machines and distributed to banks very quickly.
The cash was released following a decision by the United Nations sanctions committee in New York.
The official said the transfer should make it possible to pay many public sector workers over the Eid holiday.
Many of those dependent on government salaries have not been paid for many weeks.
The move comes on the eve of a major international conference on the future of Libya to be held in Paris on Thursday, chaired jointly by French President Nicolas Sarkozy and UK Prime Minister David Cameron.