LAHORE, Pakistan — President Gen. Pervez Musharraf on Friday swore in a caretaker administration and declared he had "introduced the essence of democracy in Pakistan," the day a senior U.S. envoy arrived in capital to urge the end of emergency rule.

The government also lifted the house arrest of opposition leader Benazir Bhutto, who has urged fellow opposition leaders to join her in forming an alliance to replace Musharraf and govern until parliamentary elections expected by Jan. 9.

Police said the detention order against Bhutto was withdrawn overnight. Scores of guards and barricades remained for Bhutto's own protection but she was free to move around, said Zahid Abbas, a senior police official.

Bhutto, a two-time former prime minister who returned from exile last month to launch a political comeback, was detained Tuesday to prevent her from leading a protest against Musharraf's Nov. 3 declaration of a state of emergency.

Bhutto immediately reiterated her call for Musharraf to quit power, and said his sidelining of moderate opponents had allowed the rise of Islamic extremism.

"Do we want to deny this nation its true legitimate leadership and make way ... for extremist forces?" she asked reporters from behind a metal and barbed wire barrier across the driveway to her residence. "The West's interests lie in a democratic Pakistan."

Bhutto has the highest profile among the thousands of political activists who have been detained in a government crackdown on dissent that sparked an outcry at home and abroad.

Meanwhile, Asma Jehangir, head of Pakistan's main human rights organization and a former U.N. official, was also released from house arrest Friday.

U.S. Deputy Secretary of State John Negroponte landed in the capital, Islamabad, late Friday afternoon for talks on the deepening political crisis, U.S. Embassy spokesman Elizabeth Colton said. Details of his schedule were not immediately available.

The State Department said he expected to meet "with whomever he wants to see," including Musharraf and opposition politicians.

President Bush "wants the state of emergency to be lifted. And it is up to President Musharraf. He has the responsibility to help restore democracy to the country," White House press secretary Dana Perino said.

Musharraf, who seized power in a 1999 coup, insists he is still moving toward a restoration of democracy and civilian rule that Western governments believe could help stabilize the nuclear-armed country as it battles rising Islamic extremism.

At a ceremony in the capital, Islamabad, a somber-faced Musharraf said the outgoing Cabinet should be proud of having helped turn around the economy and move Pakistan back toward democracy.

"I take pride in the fact that, being a man in uniform, I have actually introduced the essence of democracy in Pakistan, whether anyone believes it or not," the general said after installing the caretaker ministers at the presidential palace.

The interim government, headed by Musharraf loyalist and former Senate chairman Mohammedmian Soomro, is charged with guiding Pakistan through the parliamentary elections.

Musharraf insists he declared the emergency to prevent judicial interference and the rising threat from militants linked to the Taliban and al-Qaida from derailing the vote.

But Musharraf's emergency faces stiff criticism from countries including the United States, his key international backer, that the ballot cannot be fair unless restrictions on the opposition and the media are ended.

Demonstrations continued Friday in defiance of a ban on political gatherings.

In the northwestern city of Peshawar, police used tear gas and batons to break up a rally by 500 supporters of a coalition of religious parties and detained more of their leaders.

About 3,000 students rallied at a university campus in Lahore, chanting slogans against Musharraf and in favor of Imran Khan, the cricketer-turned politician detained Tuesday.

Bhutto called Thursday on opposition parties to form a national unity government to replace Musharraf and organize the elections.

Her proposal, made in a telephone interview with AP, was quickly accepted by her archrival Nawaz Sharif, though the exiled former leader said the priority was to get Supreme Court judges ousted by Musharraf reinstated.

The general has long managed to keep the opposition divided and has refused to quit, telling AP on Wednesday he expects to relinquish his role as army chief by the end of November but stay on as president.

He suggested emergency rule would remain in place during the elections and blamed Bhutto for the chill in their relations that has dashed Western hopes that the two pro-Western secularists could join forces.

Bhutto said U.S. officials "worry about what would happen if Musharraf left and there would be a vacuum. So that is a concern, and a valid concern," she said.

In Washington, the chairman of the U.S. Joint Chiefs of Staff, Adm. Mike Mullen said there is no sign that Pakistan's political unrest has undermined the security of its nuclear weapons arsenal.

Associated Press writers Stephen Graham, Paul Haven and Sadaqat Jan contributed to this report.