In an interview less than three weeks before the South Asian summit, President Pervez Musharraf late on Wednesday said he was prepared to be "bold and flexible" in an attempt to resolve the dispute over Kashmir.
"If we want to resolve this issue, both sides need to talk to each other with flexibility, coming beyond stated positions, meeting halfway somewhere," he said. "We are prepared to rise to the occasion; India has to be flexible also."
For more than 50 years, Pakistan has insisted on a plebiscite to allow people in the divided Himalayan region of Kashmir to decide between joining India or Pakistan, a position backed by a series of United Nations Security Council resolutions in the late 1940s.
"We are for United Nations Security Council resolutions," Musharraf said. "However, now we have left that aside."
Musharraf refused to be drawn on how to settle the Kashmir dispute, but said any solution must be acceptable to Kashmiris. And he warned India his flexibility should not be seen as weakness.
"I'll be bold in moving it forward, but if somebody thinks I'll be bold to give up - no sir, I'm not giving up at all," he said.
"I'll be bold in moving it forward, but if somebody thinks I'll be bold to give up - no sir, I'm not giving up at all"
Washington hailed Musharraf's offer. "The United States welcomes the proposal," State Department spokesman Richard Boucher told reporters in Washington. "We think it's constructive to relinquish the demand for a referendum."
India insists Kashmir became an integral part of its territory after the princely state's Hindu ruler opted to join India after partition of the subcontinent in 1947.
The neighbours have fought two of their three wars over Kashmir and went to the brink of another in 2002.
Relations have thawed in recent months and the two armies agreed to a ceasefire in November along the front line in Kashmir.