The leaders of the two parties that won Pakistan's elections have signed an agreement on a coalition government.
Nawaz Sharif (l) and Asif Ali Zardari were winners in February's elections
Asif Ali Zardari, widower of ex-premier Benazir Bhutto, and ex-PM Nawaz Sharif called on President Pervez Musharraf to convene parliament immediately.
February's parliamentary elections delivered a crushing defeat to parties loyal to President Pervez Musharraf.
Mr Musharraf has urged the incoming government to leave politics aside and concentrate on good governance.
The coalition deal will bring together the Pakistan People's Party, which was led by Benazir Bhutto until her assassination, and the PML(N) party of Mr Sharif.
'Blow to Musharraf'
Mr Sharif has consistently called for the president to step down in the wake of the elections, which were regarded as a key step in Pakistan's transition from military to civilian rule.
The BBC's Barbara Plett, in Islamabad, says the deal will be seen as a further blow to Mr Musharraf who will face a parliament dominated by his adversaries.
Two issues had dominated the talks: The PML(N) party's insistence that judges sacked by Mr Musharraf in November be reinstated, and the PPP's desire for Mr Sharif's party to formally sign up to the cabinet.
Mr Zardari and Mr Sharif told a news conference that both matters had been settled.
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They should now focus on trying to actually agree with each other on policy decisions, and not let political and personal rivalries impede progress.
All the sacked judges will be reinstated via a parliamentary resolution passed within 30 days of forming a new government.
That appears to mean that the chief justice will get back his job, in defiance of Mr Musharraf's strong objections, our correspondent says.
In return Nawaz Sharif has agreed that his party will join the cabinet - even though he does not recognise the president's right to rule.
The PPP said it would proceed cautiously when it came to dealing with the president.
But most analysts see this as a step either to the reduction of his powers - or a confrontation between the new parliament and the presidency.
Benazir Bhutto was killed in a suicide attack in the garrison city of Rawalpindi on 27 December, causing the elections to be delayed.