The support and cooperation of Pakistan's Inter-Services Intelligence (ISI) Directorate is regarded as vital to the West in fighting the threat of al Qaeda globally, and defeating the Taliban insurgency in neighbouring Afghanistan.
But critics call it a "state within a state", and Pakistan's civilian leaders have regularly accused its political wing of involvement in the overthrow of their governments. Neighbouring Afghanistan and India view the ISI with great distrust.
Foreign Minister Shah Mehmood Qureshi said the ISI's political wing had been disbanded, and described it as a "positive development".
"ISI is a precious national institution and it wants to focus fully on counter-terrorism activities," the state-run Associated Press of Pakistan quoted him as saying.
The report did not say when the decision was taken.
The army has ruled Pakistan for more than half its history since 1947. Consequently, issues related to the military are closely watched in the region as well as by nuclear-armed Pakistan's Western allies.
MILITARY PUSHED BACK
The latest chapter of military rule ended with the defeat of parties loyal to former army chief Pervez Musharraf in polls in February, and Musharraf's resignation as president in August.
His successor as president, Asif Ali Zardari, and Prime Minister Yousaf Raza Gilani signalled their intention to exert more control over the ISI in July, but backtracked from an attempt to bring it under the ambit of the Interior Ministry.
Senior officials say army chief General Ashfaq Kayani, who himself served as ISI head, has been supportive of Pakistan's return to civilian-led democracy while insisting that the army must look after its own affairs.
Since becoming army chief in November last year, Kayani has taken several steps to take the army out of politics, including ordering all officers out of civilian posts and barring them from meeting politicians.
He appointed a new ISI chief in September and replaced several senior officers.
The political wing was established by Zulfikar Ali Bhutto, Pakistan's first popularly elected prime minister, in the 1970s. Bhutto was toppled and hanged by the military in the late 1970s.
His daughter Benazir Bhutto had also accused ISI officials of conspiring to destabilise her two governments in the 1990s.
She was assassinated in December last year campaigning for election, but her husband, Zardari, led her Pakistan Peoples Party to victory.
Security analysts said the decision was good for the ISI.
"The involvement of ISI in politics has been a major controversy in Pakistan. This decision will help it in earning respect in the eyes of people of Pakistan, particularly at a time when it is facing the major challenge of terrorism," former army general-turned-analyst Talat Masood said.
The ISI is known to have wielded great influence on foreign and security policies, especially towards India and Afghanistan.
It played a key role in distributing arms and money, covertly supplied by the United States and Saudi Arabia, to Islamist guerrilla groups for a jihad, or holy war, against the Soviet occupation of Afghanistan in the 1980s.
Critics say the ISI was also instrumental in creating the Taliban movement in Afghanistan in the 1990s.
Pakistan officially stopped backing the Taliban after becoming a U.S. ally in 2001, and the ISI has helped the United States eliminate hundreds of al Qaeda fighters since then.
But the agency, or at least agents within it, are often accused of playing a double game and treating the Afghan Taliban and some jihadi groups as assets rather than enemies.
Some members of Pakistan's security apparatus regard these militants groups as tools to gain leverage in Afghanistan and Indian Kashmir in the long term, according to analysts.
The United States is believed to have privately urged the new government to rein in the ISI, particularly in the wake of a suicide attack on the Indian embassy in Kabul last July.
Washington demanded that Pakistan investigate Indian and Afghan accusations that the ISI was involved in the attack, which Pakistan denied.
This message is for Congress, Sonia and UPA! Pakistan knows how to fool them. Open up the doors, more Muslim terrorists will be let in, more votes for UPA.Once in power, more terrorists attacks all over India, more Hindus killed, terrorists protected by the govt. History repeats until India is taken over by the Muslims, eventually by the Italians!!!! Only difference is that there will not be another Gandhiji for freedom fight but there will be plenty of Nehrus as traitors.