
In a speech to the Kuwaiti Parliament, Mr Cameron said "history was sweeping" through the region in the wake of the uprisings in Tunisia and Egypt.
He praised the "brave and peaceful" protests by people "hungry for political and economic freedom".
He again condemned the Libyan regime's violent crackdown against popular protests, describing it as "appalling".
"Violence is never an answer to people's legitimate aspirations," he said, adding that the whole world had been "shocked" by the actions of the Libyan leadership.
At least 233 people have died in Libya in the past week, according to Human Rights Watch.
'Optimism'Libyan leader Col Muammar Gaddafi is clinging on to power and in an overnight appearance on state TV, he criticised "rumours" he had fled to Venezuela and insisted he was still in the capital, Tripoli.
Attending ceremonies in Kuwait marking the 20th anniversary of Iraq's invasion, which sparked the first Gulf War, Mr Cameron said only freedom, justice and the rule of law would allow countries to meet the aspirations of their young populations.
Continue reading the main storyWe have some of the toughest rules on export licences and exports of arms anywhere in the world. Everything has to meet those rules”End Quote David Cameron In the past, British governments had promoted trade and security links with regimes in the Middle East in the pursuit of stability rather than wider goals - a policy he described as a "trade-off between interests and values".
But Mr Cameron said this approach was no longer justified and that only political and economic reform could ensure long-term stability.
There were grounds for "cautious optimism" in the region because the majority of protesters seeking change have done so "peacefully and bravely", he said.
Although it was not yet clear what the outcome would be in the region, he said he was encouraged by signs of a "peaceful path" towards wider political participation and an end to the "false choice between repression and extremism" that countries had faced in the past.
Arms salesDuring his visit, which was originally planned as a trade-centred tour of the Middle East but was altered to include Egypt, Mr Cameron has also been defending trade between British arms companies and some regimes in the Arab world.
The Foreign Office has revoked a series of export licences to Bahrain and Libya covering tear gas and gun components following the violence in both countries.
Mr Cameron said: "Britain has a range of strong defence relationships with countries in the region.
"I seem to remember we spent a lot of effort and indeed life in defending and helping to defend Kuwait, so the idea that Britain should not have defence relationships with some of these countries I don't understand. It is quite right that we do.
"We have some of the toughest rules on export licences and exports of arms anywhere in the world. Everything has to meet those rules."
But the PM has been criticised for the number of British defence firms accompanying him on his trip.
Labour said many people would be "surprised" at the presence of defence firms on the trade mission given the condemnation by the UK and other countries of the violent crackdown against popular protests in Libya and Bahrain in recent days.
Six of the 20 businessmen accompanying Mr Cameron are from defence and aerospace firms.
At the same time, Defence Minister Gerald Howarth is also attending an arms fair in Abu Dhabi.
'Legitimate'But shadow defence minister Kevan Jones said that while the defence sector was a crucial export industry for the UK, he was concerned about the timing of the trip.
"Many people will be surprised that the prime minister, in this week of all weeks, may be considering bolstering arms sales to the Middle East," he said.
The BBC's deputy political editor James Landale, who is travelling with Mr Cameron, said the prime minister believed it was perfectly legitimate for the UK to have defence contracts with allies such as Kuwait when equipment sold was used to defend that country's borders.
Mr Cameron arrived in Kuwait City from Egypt, where he had met caretaker Prime Minister Ahmed Shafiq and the de facto leader, Field Marshal Hussein Tantawi.
Mr Cameron walked through Tahrir Square, the centre of the demonstrations that led to the fall of President Mubarak, and met figures from the protest movement, although not representatives of the Muslim Brotherhood - the banned Islamic group which is thought to have widespread public support.
A.nemdil & Press Agencies
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