In a nationwide address on radio and television on Thursday, Musharraf also appealed to the opposition to accept his decision "in the interest of sustainable democracy and development".
Last December, Musharraf had promised to shed his uniform by 31 December 2004, in return for the support of the six-party Islamic opposition alliance, Muttahida Majlis-e-Ammal (MMA) in adopting the controversial seventeenth amendment bill, also known as the Legal Framework Order (LFO).
The LFO gave Musharraf sweeping powers, including allowing him to dismiss the government and dissolve the national assembly.
Earlier this year, however, he indicated he might renege on the promise, which prompted the pro-Musharraf ruling coalition of the Pakistan Muslim League (Q) to push through new legislation allowing him to retain both the presidency and the army chief's office.
Musharraf said "the two top-most democratic institutions of the country, the Senate and the National Assembly have passed the bill that I should continue to hold two offices".
The MMA, which has already started an anti-Musharraf campaign with public rallies, has also proclaimed 1 January a "black day".
Musharraf said the constitution permitted him to keep both offices until 2007 and that he would not violate it.
He accused the MMA of deviating from its promises several times, and said the opposition was "involved in undemocratic activities, including imposition of their will over the rule of the majority".