A court dropped five corruption cases against the husband of assassinated former Prime Minister Benazir Bhutto on Wednesday.
The move could improve relations between Pakistan's U.S.-backed president and the party set to lead its new government.
Bhutto's party came in first in last month's parliamentary elections, routing supporters of President Pervez Musharraf and triggering calls for the former military strongman to quit.
Wednesday's ruling in favor of Asif Ali Zardari in an anti-corruption court will anger some ordinary Pakistanis but may smooth the way for a new administration to take office and begin tackling urgent issues including rising Islamic extremism.
Police said Wednesday they had detained eight suspected militants for questioning about a suicide attack the previous day on a naval college in Lahore that killed four people.
Also Wednesday, a court convicted and sentenced to death an alleged militant on charges of orchestrating a suicide blast that killed an American diplomat, David Foy.
Foy and three Pakistanis died when an attacker rammed an explosives-laden vehicle into his car on March 2, 2006, near the U.S. Consulate in the southern city of Karachi.
The following August, police arrested two suspects — Anwarul Haq and Usman Ghani — and said they had admitted orchestrating the attack. Prosecutors have alleged that Haq accompanied the bomber to the scene.
Al-Qaida link to U.S. diplomat death
At a closed-door hearing on Wednesday, an anti-terrorism court in Karachi sentenced Haq to death on charges including murder and committing an act of terrorism, government prosecutor Naimatullah Randhawa said outside the court.
Mohammed Farooq, a lawyer for Haq, said he would appeal the conviction. He claimed police had produced "fake" witnesses against his client.
Randhawa said Ghani was acquitted for lack of evidence and that he would appeal that decision.
The court had already completed its examination of the evidence and announced only the verdict and sentencing on Wednesday. Neither of the two men appeared.
Al-Qaida claimed responsibility for the bombing, which wounded about 50 other people and came a day before President Bush began an official visit to Pakistan.
Meanwhile, the anti-corruption court in Rawalpindi ordered prosecutors to terminate five long-standing cases against Zardari under an order given by Musharraf last year.
"He has been acquitted," said Farooq Naek, Zardari's attorney.
Government prosecutor Zulfikar Ahmad Bhutta confirmed that the cases had been dropped. He said property including businesses and a bulletproof limousine would be returned immediately to Zardari.
The National Reconciliation Ordinance instructed courts to dismiss corruption cases against politicians and bureaucrats dating from before Musharraf seized power in a 1999 coup. The ordinance paved the way for Bhutto's return from exile before she was slain in a December suicide attack.
Last week, the Supreme Court lifted a stay order on the ordinance, opening the way for Wednesday's ruling.
Zardari dubbed 'Mr. Ten Percent'
The cases dropped include charges of illegal payments relating to the purchase of thousands of Polish tractors and the construction of a polo ground inside the prime minister's residence. Zardari spent years in jail without being convicted and insists the charges were politically motivated.
An alleged money-laundering case is still pending against Zardari in Switzerland.
Zardari, a former Cabinet minister, acquired the nickname Mr. Ten Percent for allegedly pocketing kickbacks during the 1990s when his wife led two short-lived governments.
His return is eyed with suspicion by many Pakistanis, for whom he symbolizes a decade of corruption and misrule that nearly bankrupted Pakistan.
But Bhutto's killing and Zardari's takeover of her party have made him a key figure in Pakistan's fraught journey back toward democracy after years of military rule.