Mrs May acknowledged that Fatima Boudchar, who was almost five months pregnant at the time of her detention in 2004, and Abdel Hakim Belhaj, a prominent opponent of Gaddafi, had been subjected to "appalling" and "harrowing" treatment and offered an "unreserved apology".
Belhaj, a former fighter in the Libyan Islamic Fighting Group that had opposed Gadhafi, and his wife were kidnapped in Thailand in 2004 and sent to Libya.
Fatima Boudchar and her eldest son Abderrahim attended Parliament for the apology.
Belhaj was held for more than six years and said he was subjected to torture.
They say British intelligence provided information that helped the CIA abduct them and have spent years pursuing British officials through United Kingdom courts seeking compensation and an apology. Belhaj refused to receive any compensation.
The apology, delivered in Parliament on 10 May 2018 by the Attorney General Jeremy Wright, comes in a letter from Prime Minister Theresa May to the family.
It is understood any deal won't involve large financial compensation, said a source.
Wright said the settlement contained no admission of liability.
The government also admitted to retrieving private information of the couple and missed countless opportunities to reverse the plight of Belhaj and his wife.
"The U.K. government's actions contributed to your detention, rendition and suffering", the letter said.
"The UK government believes your account, neither of you should have been treated in this way".
"We should have understood much sooner the unacceptable practices of some of our global partners", she wrote in her letter. "We accept this was a failing on our part", Wright further added.
Boudchar was in the public gallery of the House of Commons on Thursday to hear Wright's apology.
Addressing a press conference in Turkey, Belhaj said the appointment of Haspel, is "a step in the wrong direction and an expression of poor intent".
"Today's candid apology from the government helps restore the humanity and dignity so brutally denied to my clients during their ordeal, and is warmly welcomed".
In an article for The New York Times this week, Ms. Boudchar described her time in C.I.A. captivity in Thailand.
Belhadj says he was originally detained in China, before being transferred to Malaysia and then moved to a Central Intelligence Agency "black site" in Thailand.
The renditions happened at the height of the US -led "war on terror", and at a time when Britain was trying to improve relations with Gadhafi, a former global pariah who had recently renounced weapons of mass destruction.
Kristian Coates-Ulrichsen of the Baker Institute for Public Policy told noted in a report past year that "Qatar developed close links with key Islamist militia commanders [in Libya] such as Abdelhakim Belhaj, once the head of the Libyan Islamic Fighting Group and, in 2011, the commander of the Tripoli Brigade".
The prime minister added that "we should have understood sooner the unacceptable practices of some of our global partners".