Musharraf, holding back tears, handed over his ceremonial baton to his successor, Gen. Ashfaq Kayani, at a ceremony in Rawalpindi attended by hundreds of military and government leaders and other civilians.
"The system continues, people come and go, everyone has to go, every good thing comes to an end, everything is mortal," Musharraf said, reported Reuters.
Since coming to power in a bloodless military coup in 1999, Musharraf has maintained his military commander status. After winning re-election in October, the Supreme Court weighed legal challenges to his dual role, but before the court announced a decision, Musharraf declared emergency rule, suspended the constitution and removed several judges.
The reconfigured court later dismissed the challenges, though the opposition continued to demand Musharraf relinquish his army post.
Key opposition leaders, including former Prime Minister Benazir Bhutto, welcomed the move Wednesday but expressed some reservations about accepting Musharraf's status as a civilian president, reported the Associated Press.
White House press secretary Dana Perino said President Bush considers Wednesday's action "a good step," but wants Musharraf to lift emergency rule before parliamentary elections take place Jan. 8.
Britain, which like the United States considers Pakistan a key ally in the war on terrorism, agreed that lifting emergency rule is necessary.
"We understand the threat to Pakistan's peace and security, but I have urged President Musharraf to use the normal democratic process to respond," said British Prime Minister Gordon Brown, according to the AP.
Musharraf has insisted the state of emergency is necessary to maintain stability and continue to fight Islamic terrorism.