Musharraf imposed emergency rule on November 3 and suspended the constitution by issuing his own provincial constitutional order as chief of army staff.
He was sworn in for a second term as president on Thursday after standing down as army chief, and has said he will lift emergency rule by December 16.
"The [Bhutto-Sharif] meeting is scheduled at 7pm (1400 GMT) this evening at Zardari House," Farhatullah Babar, PPP spokesman, told AFP, referring to Bhutto's residence in Islamabad.
"They will discuss whether or not to boycott upcoming elections."
Sharif was expected to arrive in Islamabad late on Monday from the eastern city of Lahore, his hometown and political stronghold.
Sharif's party also confirmed the meeting and said that it would be "crucial" for the future of democracy in Pakistan to boycott the elections.
Earlier, Bhutto officially launched her party's bid for election, saying an opposition boycott of the polls would only help Musharraf legitimise emergency rule.
"If we all boycott elections, it will give Musharraf a two-thirds majority in the parliament to validate his provisional constitutional order," she said on Sunday.
She said in the northwestern city of Peshawar: "I am getting conflicting signals from Nawaz Sharif and Qazi Hussain Ahmad about [an] election boycott as they have filed nomination papers and, if someone does that, it means he is taking part in election."
Ahmad is the chief of the Islamist alliance, Muttahida Majlis-e-Amal, which is also divided over the boycott issue.
"[But] Moderate and democratic forces must work together. I have signed a charter of democracy with Nawaz Sharif and we are committed to [it]," she said.
Election candidates will compete for 272 seats in the national assembly and 577 in provincial assemblies constituencies, an election commission spokesman said, adding that the commission will meet Monday to review electoral procedures.
The election commission spokesman has said the filing of nomination papers had been delayed in about 18 constituencies of the North Western Frontier Province and tribal areas bordering Afghanistan after recent unrest.
Pakistan's military launched a massive operation in November against fighters loyal to Maulana Fazlullah, a pro-Taliban cleric, in the Swat valley and Shangla districts, where more than 250 fighters have been killed.
Bhutto warned on Sunday that rising tension in tribal areas of Pakistan could result in the "Balkanisation" of the region, and that foreign troops may intervene if Pakistan does not assert its control over these areas.