Pakistan's President Pervez Musharraf has announced that he intends to lift a state of emergency on 16 December.
He was addressing the nation after leaving the army and being sworn in for a new term as a civilian head of state.
He urged all parties to take part in January's elections. One rival, Benazir Bhutto, said she would, but Nawaz Sharif said he would boycott the vote.
On Wednesday, President Musharraf stepped down as army chief amid heavy domestic and international pressure.
Observers say there will be more stiff challenges to his rule in the weeks ahead.
Ms Bhutto said her opposition Pakistan People's Party (PPP) would take part in the 8 January general elections to try to keep them free and fair.
"The dice is stacked against the opposition, but we feel that if we boycott, then the regime won't need to rig, and the world will turn around and say the election was fair," she told the BBC shortly after the presidential address.
"So it's important for us to mobilise the support we have, and fight in the field, and... if we do that, they will be forced to rig to stop the PPP, or they will be forced to take the measures necessary to make the elections more credible," Ms Bhutto said.
But Mr Sharif said he and his allies would take no part in the polls unless judges sacked under emergency rule were reinstated, which correspondents say is unlikely to happen.
"We will try to convince other political parties so that this boycott is effective," he told reporters in Lahore.
Mr Sharif and Ms Bhutto are now expected to hold talks to decide what to do next.
The two former prime ministers have already filed papers to contest the elections. They can formally withdraw their nominations by 15 December at the latest.
For Thursday's ceremony and TV address, Pervez Musharraf wore a black traditional suit (sherwani) instead of a military uniform.
He was elected to a second term as president by the country's parliament and provincial assemblies in October. The legitimacy of the vote has been hotly contested.
Mr Musharraf told the nation he had declared emergency rule on 3 November because "the very existence of our nation was in danger".
"I was elected with 57% votes and there was a conspiracy to abort that," he said, in an apparent reference to the Supreme Court which was hearing legal challenges to his re-election.
One of President Musharraf's first moves under emergency rule was to sack the judges. A reshaped court later dismissed all the legal challenges he had faced.
Mr Musharraf also said on Thursday that there had been an "explosion of terrorism", which emergency rule had helped deal with.
"I think now things have improved, the administration is now on the right track and terrorism has been brought under control," he said.
"Now, I'm fully determined that the emergency will be lifted on 16 December."
Earlier in the day, Mr Musharraf, who took power in a bloodless coup in 1999, took the oath for a second term as president, this time as a civilian head of state.
Afterwards, he welcomed the return of Ms Bhutto and Mr Sharif to Pakistan, saying it would be "good for the political reconciliation".
Mr Musharraf also insisted that the general elections would be held on schedule "come hell or high water".
He promised the polls would be free and fair and open for monitoring by international observers.
As he was being sworn in, about 200 lawyers opposed to his rule clashed violently with police in Lahore.
A day earlier, Mr Musharraf had quit as army chief, handing the title over to Gen Ashfaq Pervez Kayani.
Ms Bhutto welcomed that move but said her party was "not in a hurry" to accept Mr Musharraf as a civilian president.
US President George W Bush called the Pakistani leader "an absolute reliable partner" but repeated US demands that the emergency end before elections.
The BBC's Barbara Plett in Islamabad says the civilian investiture does not mean an end to Mr Musharraf's difficulties.
The state of emergency has alienated much of the secular middle class, while an Islamist insurgency has also gained strength under his rule, she says.
If his opponents join forces against him, he could be in real trouble, our correspondent says. If not, he might be able to play them off against each other. Either way, the president will continue to struggle with the political crisis.