Iftikhar Chaudhry and other judges were sacked by Gen Musharr
Pakistan’s government has said a sacked Supreme Court chief justice will be reinstated, prompting the opposition to call off a major rally in the capital.
Prime Minister Yousaf Raza Gilani said Iftikhar Chaudhry would resume his old post later in March.
Opposition leader Nawaz Sharif had joined campaigning lawyers in demanding the judge’s reinstatement.
Announcing that the march on Islamabad had been called off, Mr Sharif urged supporters to celebrate “with dignity”.
Mr Gilani said Mr Chaudhry would resume his post following the resignation of the current Chief Justice Abdul Hameed Dogar on 21 March.
“I announce the restoration of all deposed judges including Mr Iftikhar Chaudhry,” PM Yousaf Raza Gilani said.
The American envoy to Pakistan, Richard Holbrooke, hailed the decision. He was quoted by the New York Times as saying the US applauded “the statesmanlike act by President Zardari” and hoped it would “defuse a dangerous confrontation”.
The unrest has alarmed the West, which wants Pakistan to focus on the battle against the Taleban on the Afghan border.
Mr Chaudhry and 60 other judges were dismissed by former President Pervez Musharraf in 2007.
Most have since been reinstated but Mr Chaudhry and a handful have not been allowed to return to their old posts.
Mr Gilani’s announcement, broadcast on television, triggered scenes of jubilation from Mr Chaudhry’s supporters outside his home in Islamabad and among supporters of Mr Sharif.
We have said that we will restore the judges and the independent judiciary and by the grace of Allah we have achieved it
Mr Gilani also said opposition activists and leaders detained over the last week of mounting disturbances would be freed and a ban on demonstrations in the capital and several provinces lifted.
The announcement is a victory for the lawyers’ after their campaign of street protests, says the BBC’s Barbara Plett in Islamabad.
“This is a victory for the people of this country,” said Baz Mohammad Kakar, a leader of the lawyers’ movement.
“Chaudhry is the first chief justice in the history of Pakistan who has proved himself to be a judge for the people, as a chief justice for the people.”
Our correspondent says the development is also a victory for Mr Sharif, a long-time opponent of President Zardari who had backed the lawyers’ calls to reinstate Mr Chaudhry.
After the prime minister’s announcement he called off the march on Islamabad, saying: “Let us celebrate this with dignity.”
Speaking from Gujranwala, about 80km (50 miles) north-west of Lahore, he told supporters: “We have said that we will restore the judges and the independent judiciary and by the grace of Allah we have achieved it.”
Mr Sharif is now expected to meet Mr Gilani later on Monday.
It marks a complete turnaround from the situation on Sunday, when Mr Sharif left Lahore with a convoy of supporters, defying an apparent effort to put him under house arrest.
Riot police had surrounded his Lahore home but after supporters clashed with them Mr Sharif moved past unchecked and left the city.
Several days of rallies around Pakistan were to culminate in a “long march” on Islamabad and a sit-in to press the demand for the reinstatement of the judges.
The government’s announcement marks the end for the time being of the power struggle between Mr Sharif and Mr Zardari, says our Islamabad correspondent.
There are indications that other issues that inflamed tensions between the two will be resolved: a Supreme Court decision last month that banned Mr Sharif and his brother Shahbaz from elected office, and President Zardari’s decision to put their stronghold in Punjab province under direct rule from Islamabad.