President George W Bush has upgraded relations with Pakistan by formally naming it as a major non-Nato ally.
Pakistani forces often co-ordinate attacks with US troops in Afghanistan
The move is in recognition of Islamabad's contribution in the fight against al-Qaeda, and is being seen as Washington's way of saying thank-you.
Pakistan will now enjoy a special security relationship with the US.
Islamabad welcomed the move, calling it as a success for the country's foreign policy and a recognition of the
bold policies of President Musharraf.
Eligible for benefits
"I hereby designate the Islamic Republic of Pakistan as major non-Nato ally of the United States for the purposes of the Arms Export Control Act," President Bush's statement said.
The BBC's Rob Watson in Washington says that Pakistan's new status means that it is now eligible for a series of benefits in the areas of foreign aid and defence co-operation, including priority delivery of defence items.
MAJOR NON-NATO ALLIES
Are eligible for priority delivery of defence material
Can stockpile US military hardware
Can participate in defence research and development programme
Can benefit for a US loan guarantee programme
But our correspondent says that the symbolism is more important than the substance.
Only six years ago, Pakistan was under US sanctions after conducting nuclear tests.
Earlier this year the US expressed concern after the man credited with developing the country's nuclear bomb, Dr AQ Khan, admitted leaking nuclear weapons technology abroad.
Pakistan now finds itself in the same exclusive club as such close American friends such as Israel and South Korea.
US plans to upgrade relations with Pakistan were first announced by US Secretary of State Colin Powell during a visit to Pakistan in March.
President Bush's formal announcement is unlikely to be well received by India which does not have special status with the US.
But in what our correspondent says is a strange irony of timing, the president's announcement coincided with a report from the commission investigating the 11 September 2001 attacks on the World Trade Centre.
The US expressed concerns earlier this year over the leaking of nuclear secrets
It accused Islamabad of helping the Taleban to shelter Osama Bin Laden, saying that it had "significantly facilitated" his stay in Afghanistan prior to the attack.
"The Taleban's ability to provide Bin Laden a haven in the face of international pressure and UN sanctions was significantly facilitated by Pakistani support," the report said.
But Pakistan later became a key US ally, dropping its support for the Taleban and allowing US troops to use its air bases and share intelligence.
Its promotion to a major non-Nato ally has been welcomed by Information minister Sheikh Rashid, who said it would improve relations with the US and enhance Pakistan's position in global politics.
He said Islamabad would now be able to acquire defence equipment that was previously not available.