"[Musharraf] repeated his commitment to retire from his army post before commencing his second presidential term, and we urge him to do so as soon as possible," Negroponte said.
Negroponte, the most senior US official to meet Musharraf since he imposed emergency rule on November 3, said Musharraf had reconfirmed that elections would take place by early January.
The US envoy said he had urged the president to release thousands of people who have been imprisoned since emergency law was imposed.
Opposition politicians and their supporters, journalists and members of the judiciary are among those who have been arrested.
"Recent political actions against protesters, suppression of the media and the arrests of political and human rights leaders, runs directly counter to reforms that have been undertaken in recent years," Negroponte said.
"I've urged the government of Pakistan to stop such actions, to lift the state of emergency and release all political detainees."
He said reconciliation between moderate political forces was "very desirable", in an apparent reference to Musharraf and Benazir Bhutto, leader of the opposition Pakistan People's Party (PPP).
Bhutto has ruled out working with Musharraf after being placed under several spells of house arrest since emergency law was imposed.
|Opposition fighters in the Swat valley region|
have been effective against the army
The US had hoped the duo, seen as strong allies in the fight against al-Qaeda and the Taliban, would end up sharing power after the election.
Musharraf says that the emergency law is designed to combat al-Qaeda and Taliban-linked fighters, many of them based in the Swat valley region.
The fighters in Swat, most of which are loyal to Mualana Fazlullah, a Muslim cleric, have made gains over Pakistan's military in recent weeks.
The opposition fighters have captured villages, police stations and government buildings in the region.
Washington has granted $10bn in aid to Pakistan since 2001, when Musharraf pledged support to the US-led "war on terror".
Negroponte admitted that Pakistan faced "challenges" against opposition fighters.
"It is yet another reason to be concerned about the situation in Pakistan," he said.