The 1.5 million francs sum was transferred to an account in Germany for Hannibal Qaddafi last year as part of a settlement for a row that erupted after he was briefly arrested in Geneva.
But now, "Switzerland has been reimbursed with the money which it had to pay to Libya as compensation in 2010," said a Swiss foreign ministry statement.
The Libyan-Swiss dispute had erupted in 2008, when Hannibal and his pregnant wife were briefly arrested at a Geneva hotel on suspicion of mistreating two of their domestic staff, prompting Libyan retaliation.
The standoff deepened when the Tribune de Geneve newspaper published leaked Swiss police mugshots of a dishevelled looking Hannibal in September 2008 that were taken at the time of his arrest.
Under a deal aimed at normalising ties that was overseen by Spain and Germany last year, the compensation would only be handed over if those responsible for publishing the photos were not identified.
The money was aimed at securing the release of Swiss businessman Max Goeldi, who had been detained by Libya during the dispute. Goeldi was released in June last year.
Following Libya's conflict, on February 24, the Swiss government ordered a freeze on any assets that may belong to the Qaddafis and their entourage.
The European Union has also imposed an assets freeze on the regime.