Musharraf is visiting Saudi Arabia, a close friend of his country, at a time when he is under intense international pressure to lift his emergency rule, release all political prisoners, and hold free and transparent elections.
Nawaz Sharif, whom Musharraf ousted in a bloodless coup in 1999, has been living in exile in Saudi Arabia but has been expressing his desire to return to Pakistan.
The New York Times, quoting Pakistani officials and Western diplomats, reported Wednesday Saudi Arabia has indicated its support for Sharif's return to participate in the January elections. The report said the Saudis see Sharif as more conservative than Benazir Bhutto, another former premier, who has been allowed to return.
It is still not clear if Sharif would be willing to meet with Musharraf in Saudi Arabia.
Pakistan's Dawn reported Wednesday Bhutto says her Pakistan People's Party would decide in the next few days whether to take part in the elections.
Dawn also reported Karachi police Tuesday tried to break up journalists protesting the government's media curbs, arresting more than 100 demonstrators.