Army chief Musharraf imposed emergency rule on November 3, suspending the constitution, sacking most top judges, locking up lawyers and rounding up most of the political opposition and rights activists.
He justified his steps by saying the judiciary was hampering the battle against militants and interfering with governance. But diplomats say Musharraf's main objective was to stop the Supreme Court ruling his October 6 re-election invalid.
Rivals had filed legal challenges in the Supreme Court arguing Musharraf was ineligible to contest while still army chief.
Musharraf, under pressure from Western allies and his rivals to put the nuclear-armed country back on a path to democracy, said on Sunday a general election would be held by January 9.
But he declined to say when the emergency would be lifted and constitution restored.
He also said he would step down as army chief and be sworn in as civilian president as soon as the Supreme Court -- where new judges seen as friendly to the government have been appointed -- ruled on the challenges to his election.
Attorney General Malik Adul Qayyum said the Supreme Court would most likely resume its hearing into the petitions challenging Musharraf's candidacy on Wednesday, the Daily Times reported.
Qayyum told the newspaper he was hopeful the case would be decided by the weekend.
Opposition leader and former prime minister Benazir Bhutto, who has been demanding an end to emergency rule and a speedy election, welcomed Musharraf's announcement on the election as positive but said much more was needed.
US Secretary of State Condoleezza Rice also welcomed the announcement but called for an end to emergency rule.
The United States is worried the political turmoil will distract its ally's attention from its efforts against al Qaeda and the Taliban.
Pakistani forces are battling an Islamist insurgency spreading from remote lands on the Afghan border -- where Osama bin Laden is believed to be hiding -- into so-called settled areas of the northwest.
The United States has said it expects Musharraf, who took power in a bloodless 1999 coup, to quit the army, become a civilian leader and hold fair elections.
Rice told ABC's "This Week" programme on Sunday that Musharraf's promised steps were "essential to getting Pakistan back on a democratic path".
"We are also encouraging that the state of emergency has got to be lifted and lifted as soon as possible," she said.
Bhutto arrived in the eastern city of Lahore on Sunday to prepare for a "long march" motorcade protest to Islamabad, beginning on Tuesday.
Bhutto, who has the capacity to mobilise huge crowds, has also called for the reinstatement of sacked judges, but Musharraf ruled that out.
"We are ready to die for Benazir ... Until our death we will continue this work," Zarqa Butt, vice president of the Lahore women's wing of Bhutto's Pakistan People's Party, said on Sunday.
Bhutto's supporters and other activists have clashed with police in various parts of the country, most recently in her home province of Sindh on Sunday, but there has been no major violence.
The government says 2,500 people have been detained during the emergency, although Bhutto's Pakistan People's Party says well over 5,000 of its activists have been picked up.
Musharraf said he expected politicians detained since the emergency was imposed to be freed to take part in the elections but said no one would be allowed to create anarchy.
Bhutto and Musharraf have been involved in power-sharing talks for months and Bhutto said she was not shutting the door to more. Musharraf said parties could talk after the election.