While Sharif had demanded the reinstatement of the judges, the PPP - the largest party in the coalition - had refused to state when they would make a decision.
Musharraf sacked the judges last year, fearing they might mount a legal challenge to his re-election as president while he was also head of Pakistan's military.
But their sacking set off a wave of public protests and eventually led to the coalition's threat to impeach Musharraf before he stepped down on Monday last week.
Analysts say the PPP is also unwilling to restore the judges because of fears they could overturn an amnesty on corruption charges that allowed Asif Ali Zardari, the PPP leader, to return to the country last year.
They say that while the PPP would still have enough allies in parliament to hold the government together, governing in the long term will be difficult with Sharif in opposition.
PHOTO CAPTION:
Nawz Sharif
Al-Jazeera