Pakistan President Pervez Musharraf was to swear in a caretaker government on Friday hours after former premier Benazir Bhutto was released from house arrest.
Musharraf has appointed senate chairman Mohammedmian Soomro as interim prime minister, picking a close ally to oversee January polls that the opposition may yet boycott over fears they will be neither free nor fair.
Soomro, 57, and his cabinet will take the oath for their new positions at a ceremony in the presidential palace, after Pakistan's parliament dissolved at midnight on Thursday having served out its five-year term.
"We are introducing a new culture of smooth transition which is as it should be in civilised societies," military ruler Musharraf said at a dinner for members of the outgoing government.
Soomro takes over as premier from Shaukat Aziz, who assumed office in 2004.
But Soomro, a former banker and member of Musharraf's party, will find it tough to keep things calm amid mounting disquiet at home and abroad over the president's November 3 imposition of a state of emergency.
In the latest development, Pakistan authorities withdrew a seven-day detention order on Bhutto early Friday, a top provincial government official told AFP.
"The detention order has been withdrawn but normal police security will stay with her," said Khusro Pervaiz, home secretary of Punjab province.
"The order was placed to stop Bhutto from leading a public rally in the wake of a very credible suicide attack threat."
Bhutto had been detained behind barbed wire barricades at the home of a close aide in the eastern city of Lahore. Three people were killed Thursday in protests against her detention further south, in Karachi.
Meanwhile, John Negroponte, number two to US Secretary of State Condoleezza Rice, is reportedly due to arrive Friday to press the concerns of Washington, which sees Pakistan as a vital ally in the fight against Al-Qaeda and the Taliban.
The United States has joined Pakistan's opposition in calling for Musharraf to restore the constitution before elections are held, quit as army chief and release thousands of people detained under emergency laws.
Over the past two days Bhutto has ratcheted up the tension from her house arrest, telephoning key political figures in a bid to form a united front against Musharraf.
They include her exiled one-time rival Nawaz Sharif, currently in Saudi Arabia, with whom she spoke on Thursday to discuss forging an alliance.
She said further talks would include whether they would boycott the elections.
Three people were killed Thursday in protests against her detention further south, in Karachi.
She spent two hours in talks on Thursday with US consul general Bryan Hunt after he visited her.
But Bhutto said she had no meeting scheduled with Negroponte, who will be the highest ranking US official to visit the nuclear-armed nation of 160 million people since Musharraf's emergency decree.
Negroponte will meet senior Pakistani officials and is also expected to meet Musharraf himself. The State Department has said he will push Musharraf to lift the state of emergency.
In Washington, the White House reacted cagily to talk it was giving up on Musharraf and weighing other options, following a report in the New York Times.
Defence Secretary Robert Gates suggested that Musharraf's effectiveness as a US ally hinged upon his ending the state of emergency and stepping down as army chief of staff.
The US had quietly backed Bhutto's return to the country last month and her talks for a possible power-sharing deal with Musharraf, seeing the moderate pair as ideal partners against Islamic militancy.
Bhutto says the negotiations are over and vowed this week that she would never serve in a government with Musharraf.
She also dismissed an announcement by Pakistan's attorney general that Musharraf would shed his uniform by December 1, when legal challenges to his re-election as president are expected to be resolved.
"Too much water has gone under the bridge," she said.