France and Algeria have signed an agreement on civil nuclear co-operation during a visit to Algiers by the French Prime Minister, Francois Fillon.
Mr Fillon described the agreement as a sign of a "transformation" in the countries' ties.
Relations were very bad for years after the Algerian war of independence forced France to abandon its treasured colony.
Mr Fillon said French firms would not "give in to threats", after a Frenchman was killed in a bombing this month.
The militant group al-Qaeda in North Africa claimed the bombing east of Algiers on 8 June, and promised to continue attacking Western targets.
Military pact
On Saturday French and Algerian ministers signed a deal on the peaceful use of nuclear energy, which will see the two countries co-operate in the field of training and conduct joint research projects.
Eventually nuclear power plants could be built on Algerian soil.
"There is no clearer signal of France's intention to establish an exceptional partnership with Algeria," said Mr Fillon, making the first visit by a French prime minister in more than two decades.
He also signed a military pact with Algeria, as well as banking agreements.
During his trip he will attempt to convince the Algerian President, Abdelaziz Bouteflika, to sign up to a union of Mediterranean countries, being launched at a summit in Paris next month, says BBC correspondent James Copnall.
Algeria, like many Arab countries, has mixed feelings about the project - which is championed by the French President Nicholas Sarkozy - because of the presence of Israel.