Pervez Musharraf,
The 'reconciliation ordinance', grants an across-the-board indemnity for politicians active between 1988 and 1999.
"President Musharraf has signed it. It is the beginning of a new era," Sheikh Rashid, railways minister, said on Friday.
The supreme court has ruled the presidential vote can go ahead on Saturday but a final result cannot be announced until it has ruled on legal challenges against the election.
The court's judges retired on Friday after hearing final arguments on challenges by Makhdoom Amin Fahim, the PPP's vice-chairman, and by retired judge Wajihuddin Ahmad, who are both standing against Musharraf.
The supreme court ruling has given more weight to a power-sharing deal that was agreed on Friday between Bhutto, the leader of Pakistan People's Party (PPP), and Musharraf.
The agreement on power-sharing has boosted Musharraf's hopes of being re-elected.
Musharraf, who seized power in a coup eight years ago, has vowed to resign my chief by November 15 if elected.
Big relief
The deal with the PPP has taken some pressure off Musharraf, who is standing for another five-year term in office while still holding his post of army chief.
Friday's amnesty deal has effectively cleared Bhutto of the corruption charges that forced her into exile eight years ago.
It prepares the ground for her planned homecoming on October 18 in the run-up to parliamentary elections due by early 2008.
The pact was announced after she met key party members in
"The agreement says that there will be an across-the-board indemnity for public office holders between 1988 and 1999," a senior government official who had seen the draft said, on condition of anonymity.
Bhutto, whose party is the country's largest, had earlier threatened to further undermine Musharraf's widely anticipated victory by pulling her MPs from parliament, after other opposition parties also resigned.
Musharraf's allies have a majority in the two houses of parliament and four provincial assemblies that will vote for the president.
Nevertheless, he stands to benefit from Bhutto's support in the run-up to the general election.
PHOTO CAPTION