The United States has officially recognised the Somali government in Mogadishu for the first time in 20 years. The move could pave the way for international economic aid for Somalia.
Secretary of State Hillary Clinton announced the news on Thursday after a meeting in Washington with President Hassan Sheikh Mohamud.
Mr Mohamud took office in 2012 after the first vote of its kind since dictator Mohamed Siad Barre was ousted in 1991, the BBC reports.
"Today is a milestone, it is not the end of the journey, but it is an important milestone towards that end," Mrs Clinton said.
She added that the United States wanted "an open, transparent dialogue about what more we can do to help the people of Somalia realise their own dream".
Mr Mohamud said the people of Somalia were grateful for America's "unwavering support" as the country emerged "from a very long, difficult period".
"We are working for a Somalia that is at peace with itself and with its neighbours, where its citizens can go about their daily lives in safety," he said.
Assistant Secretary of State Johnnie Carson said on Wednesday the move recognised the new government's progress towards political stability and "breaking the back" of an al-Shabab insurgency.
The US never formally cut diplomatic ties with Somalia.
Mrs Clinton is not expected to announce new aid measures for Somalia, which already receives US assistance for drought, famine and refugee relief.
Mr Mohamud has also met World Bank and USAid officials on his trip to Washington.