But Abdelbaset Ali Mohmed al-Megrahi and relatives of his 270 victims will have to wait to hear whether he is to be allowed to leave prison.
Appeal judges heard Megrahi's application for bail and said they wanted time to consider their decision.
The Libyan's lawyer said he did not have long to live, and would stay with his family in the west of Scotland if he were freed. The Crown opposed Megrahi's release, arguing his prognosis was "uncertain" and that he could receive in jail whatever medical treatment was required.
For reasons of "sensitivity", details of his condition were not disclosed at yesterday's hearing.
Megrahi, 56, was convicted in 2001 of the 1988 bombing of Pan Am Flight 103 and is serving a minimum 27-year life sentence. He has already lost one appeal, but is pursuing a second, which is unlikely to begin before next spring.
The defence counsel, Margaret Scott, QC, told the Court of Criminal Appeal in Edinburgh: "He is terminally ill. His suffering will be reduced if he is released from prison conditions.
"Medically, the treatment will be the same, but his suffering will be reduced clearly if he is allowed to reside with his family while he deteriorates from his illness."
She added: "There is a compelling case for the release of this man on interim liberation."
Ms Scott said Megrahi was married with five children aged 25 to ten, and two grandchildren. Immediately after his conviction, his family moved to Glasgow, and are required each year to apply for visas. If given bail, he would stay with his family in Strathclyde. Measures would be taken for his personal security.
There was no risk of Megrahi fleeing Scotland, and an undertaking had been given by a Libyan government official that he would not be allowed into the country unless it was appropriate for him to return, she said.
The advocate-depute, Ronald Clancy, QC, said that, in light of the Libyan government saying different things at different times in the past about accepting responsibility for the bombing, the court should be reticent to attach any weight to its current undertaking.
But the "dominant" reasons for opposing Megrahi's release were the "incomparable" gravity of his crime and the unanimous verdict returned against him by the three judges at his trial.
Mr Clancy said that the Crown at the appeal would argue that there were good reasons for concluding that Megrahi's conviction was not a miscarriage of justice.
In relation to his illness, the diagnosis was not disputed but the prognosis was uncertain.
"As far as physical symptoms are concerned, he is essentially symptom-free," he said. "There is very minor discomfort for which analgesic treatment was offered but declined.
"As for psychological effects, there is no suggestion he is suffering from or on the verge of a recognised condition."
Mr Clancy said there was a system for Scottish ministers to allow compassionate release of prisoners where death was "likely to occur soon" and a life expectancy of three months had been thought appropriate.
"It cannot be said (Megrahi] is in that category," said Mr Clancy.
The appeal judges are expected to announce their decision within days rather than weeks.
21 DECEMBER, 1988: Pan Am Flight 103 explodes over Lockerbie, killing 270 people.
13 NOVEMBER, 1991: Ali Mohmed al-Megrahi and Al Amin Khalifa Fhimah indicted.
31 JANUARY, 2001: Megrahi found guilty.
25 NOVEMBER, 2003: Three judges at High Court in Glasgow set 27-year minimum term on his sentence.
15 OCTOBER, 2008: He wins latest step in a long-running battle to overturn conviction.
21 OCTOBER, 2008: It is revealed the 56-year-old has advanced prostate cancer.