The death sentence on six foreign medical workers accused of deliberately infecting hundreds of Libyan children with HIV was cut to life imprisonment last night, after relatives of the infected children accepted millions of pounds in compensation.

"We have renounced the death penalty . . . after all our conditions were met,” Idriss Lagha, the laywer for the families, said. “All the families have received compensation.” The death sentences had been upheld last week by the highest court in Libya after a marathon saga of trials and appeals.

The five Bulgarian nurses and one Palestinian doctor were sentenced to death by firing squad in 2004, but the families’ decision allowed the Supreme Judiciary Council in Libya to commute the sentences. Last night the Libyan foreign minister hinted that they may be able to move to jails in their home countries. They were convicted in 2004 of infecting 438 children with the virus that causes Aids.

The payments should help to bring to a close a case that has stirred anti-Western anger in Libya and ensured continued international isolation for Muammar Gaddafi, the Libyan leader.

Relatives of the medical workers welcomed the deal. “Thank God the death sentences were dropped,” Zdravko Georgiev, the husband of one of the jailed nurses, said. “This is at least some relief that they are not going to be executed.”

European governments have intervened to help Bulgaria, seeking to bring pressure on Libya without further antagonising public opinion there. Last Thursday France increased the pressure when Cécilia Sarkozy, the wife of the French President, paid an unannounced visit to the medical workers and met Colonel Gaddafi to emphasise French concern.

The nurses — Snezhana Dimitrova, Nasya Nenova, Valya Cherveniashka, Valentina Siropulo and Kristiana Valcheva — and Dr Ashraf Juma Hajuj have always pleaded their innocence. They said that they were tortured into false confessions soon after their arrests in 1999. Foreign HIV experts say that the infections started before the workers arrived at their hospital in Benghazi, and that they were likely to have been the result of poor hygiene.

Relatives of the children have said that the infections were part of a Western attempt to undermine Muslims and Libya. At least 56 children have died amid intense media coverage in Libya of their plight.

Under the agreement, the families will receive more than £200 million, according to lawyers. The source of the funding has yet to be made clear. Bulgarian officials indicated yesterday that some Libyan debt to their country may be written off. Last week Abdel Rahman Shalgham, the Libyan Foreign Minister, said that the compensation would be paid by “certain European countries and charitable organisations, and from the Libyan state”.

Le Figaro, the French newspaper, reported on Saturday that EU states could be involved in the compensation. The European Commission, which has already committed ¤2.5 million (£1.7 million) to the fund, has denied playing any role in the deal.

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