Pakistani troops say they have surrounded a senior al-Qaeda leader close to the Afghan border and are preparing to move in within hours.
It is the biggest Pakistani operation against al-Qaeda to date
President Musharraf said his troops appeared to have ringed a "high-value target" after fierce resistance in the remote South Waziristan region.
Other reports quote military officials saying they believe it to be al-Qaeda's Egyptian number two, Ayman al-Zawahri.
Villagers have been ordered to evacuate an area around the town of Wana.
Thousands of troops backed by helicopter gunships were deployed in the region on Thursday morning and came under heavy attack from militants.
President Musharraf told the US television network CNN that the extent of the resistance suggested the seniority of the trapped militant, but he would not be drawn on who it might be.
"It would just be a guess," he said, when asked to name the possible suspect.
In Washington, defence officials are urging caution.
BBC Pentagon correspondent Nick Childs says they have been down this road too many times before, only to be disappointed.
The area being surrounded is 25 square kilometres (10 square miles) and there is a chance the militants could slip away during the night, says Frank Gardner, the BBC's security correspondent.
If Mr Zawahri was captured, he adds, it would be a major blow to the militant network founded by Osama Bin Laden.
Egyptian in origin, Mr Zawahri is believed to serve as Bin Laden's spiritual adviser and doctor. He is also the architect of the al-Qaeda ideology.
In 1998, he was the second of five signatories to Bin Laden's "fatwa" calling for attacks against US troops and civilians.
He was a key figure in the Egyptian Islamic Jihad group, which later merged with al-Qaeda.
Mr Zawahri has appeared alongside Bin Laden in al-Qaeda videotapes released since the 11 September 2001 attacks in the US.
He has been indicted in the US for his role in the 1998 American embassy bombings in Africa, and was sentenced to death in Egypt in absentia for his activities with the Islamic Jihad group in the 1990s.
The Pakistani operation is being described as the biggest since the hunt for Bin Laden and his associates started in the area more than two years ago.
A senior security official said the authorities had laid a complete siege of a large area near Wana and would be going in with a big force in early on Friday.
Zawahri is seen as al-Qaeda's ideologue
He said if any senior al-Qaeda leader was among the militants, the security forces would make sure he did not escape.
Residents in the villages around Wana have been asked to move away from the area.
South Waziristan with its mass of mountains and hills has been cited many times as the most likely hideout of Bin Laden and al-Qaeda elements.
Fifteen Pakistani soldiers died there in clashes on Tuesday. The army says 24 militants, thought to be local tribesmen or al-Qaeda suspects, were also killed.
Meanwhile US troops are continuing their operations against Taleban fighters in Afghanistan.
On Thursday two American soldiers were killed and two wounded in a clash in the central province of Oruzgan, south of Kabul.