Pakistan is ready to put aside its demand for a referendum in the disputed territory of Kashmir, President Pervez Musharraf has said.
India's new barbed wire fence on Kashmir's de facto border
Pakistan's long-standing position has been that a referendum should decide if the divided territory become part of Pakistan or India.
The two nuclear powers have fought two of their three wars over Kashmir.
India, which has yet to respond to the new offer, has refused to comply with UN resolutions demanding a referendum.
'Beyond stated positions'
"We are for UN resolutions," President Musharraf said in an interview with the Reuters news agency.
"However, now we have left that aside.
"If we want to resolve this issue, both sides need to talk to each other with flexibility, coming beyond stated positions, meeting halfway somewhere," General Musharraf said.
The Indian Government on Thursday issued a statement regarding Kashmir which made no reference to General Musharraf's comments.
Islamabad says Kashmir should have become part of Pakistan in 1947, because Muslims are in the majority in the region.
There has been a significant improvement in relations between the two countries in recent months.
Indian Prime Minister Atal Behari Vajpayee is due to attend a regional summit in the Pakistani capital, Islamabad, in January.
The two armies have also agreed to a ceasefire along the de facto border in
General Musharraf told Reuters the two sides now had a "very real opportunity" to make peace.
"The basis for everything, the basis of a reduction in militancy... is moving
forward on a process of dialogue.
Musharraf 'will not plead' to meet the Indian prime minister
"If that political dialogue doesn't come about, who wins and who loses? It
is the moderates who lose and the extremists who win, and that is exactly
what has been happening."
President Musharraf said people in India and Pakistan were hoping for an
improvement in relations between the two countries.
"We have come to a stage where there is a thaw in relations, where there is
expectation on both sides in the people," he said.
"If the leadership doesn't rise to the occasion, it is a pity and I think
we'll disappoint our public again."
Former Indian foreign secretary JN Dixit said General Musharraf's offer on
Kashmir was an "important shift in policy" ahead of the regional summit
"He is signifying there will be flexibility in the Pakistani negotiating
process. We should be able to respond with flexibility and see if we can
find a middle ground," Mr Dixit told Reuters.
President Musharraf said he would not plead for a meeting with Mr Vajpayee at the summit.
"The ball is in his court. If he wants to meet me, I'll meet him. If he
doesn't want to meet me, I am not that keen."
He said he strongly believed that India was "intransigent" and suffered from "arrogance of power".
"I am a proud Pakistani. I will never submit," he said. "No sir, we will not forget Kashmir."