ISLAMABAD, Pakistan — President Musharraf and a former prime minister, Benazir Bhutto, were on the verge last night of forming an improbable alliance that would involve him stepping down from the army but continuing as president and her returning to Pakistan after eight years of exile to try to win back her old job, officials on both sides said.

“We’re very close to an agreement,” Ms. Bhutto said in an interview last night from London. While Ms. Bhutto said one or two issues need to be worked out, the question of whether General Musharraf would stay in uniform had been resolved.

“I don’t see that as a stumbling block,” she said. “General Musharraf understands that the people of Pakistan want him to take the uniform off. And he wants to make the people happy.”

In Islamabad, a top aide to General Musharraf confirmed that the question of whether the general would step down from the army had been settled, and that he would be making an announcement soon.

“It’s solved,” Sheik Rashid Ahmed said. General Musharraf had long resisted resigning from a military he has served his entire adult life. He had also rejected the idea of Ms. Bhutto or a former prime minister, Nawaz Sharif, returning to Pakistan ahead of elections slated for later this year or early 2008. All three are bitter rivals of one another.

But with General Musharraf’s popularity plummeting and a hostile Supreme Court likely to try to block his plans for winning a new term in office, analysts say his options are few. Retiring from the military has been considered a prerequisite if he wants a power-sharing agreement with Ms. Bhutto, a rival but also a potential partner who could help General Musharraf win re-election. In Pakistan, the parliament and provincial assemblies elect the president.

Ms. Bhutto, who leads the center-left Pakistan People’s Party, has insisted that General Musharraf consent to giving up his uniform before she signs any agreement that would allow him five more years as president.