Apart from announcing that they would contest the election promised by Musharraf next year, the two exiled leaders proposed steps to 'permanently end' the military's role in Pakistani politics.
While the Pakistan government officially sneered at the 'Charter of Democracy' inked by the two leaders in London after nine-hour discussions, the pact is likely to be a shot in the arm for Opposition pro-democracy activists within Pakistan.
Bhutto heads the Pakistan Peoples Party, while Sharif is a 'patron' of the Pakistan Muslim League (Nawaz).
Both have been prime ministers twice -- Bhutto from December 1988 to August 1990 and October 1993 to November 1996; Sharif from October 1990 to March 1993 and February 1997 until October 1999, when he was ousted by his army chief Musharraf.
Bhutto left Pakistan in April 1999 following major corruption charges against her. Heeding international calls for clemency, Musharraf exiled Sharif to Saudi Arabia, on the assurance that he would never return to Pakistan.
Both Bhutto and Sharif continue to lead their parties, which won a large chunk of the vote in the 2002 election despite allegations of rigging and a tide of defections to a pro-Musharraf outfit.
Both are members of the umbrella Opposition Alliance for the Restoration of Democracy.
The arch rivals formally buried the hatchet at a meeting in Jeddah in February last year, and their parties subsequently worked together to finalise the charter which was signed in London on May 14.
To make the military accountable, their charter proposes all military and judicial officers be required to file annual declarations of income and assets.
It also called for a return to the 1973 constitution, which was amended soon after Musharraf deposed Sharif.
Noting that terrorism and militancy are direct by-products of military rule, it proposes a National Democracy Commission to promote and nurture a democratic culture in the country.
It calls for the abolition of Musharraf's National Security Council and all special courts, including the Anti-Terrorism and Accountability Courts. A Truth and Reconciliation Commission will instead be set up to give legal succor to victims of torture, imprisonment and targeted legislation. This commission will also examine the military takeovers in Pakistan and suggest ways to avoid future takeovers.
To avoid proliferation -- a touchy issue with the Musharraf regime tainted with the A Q Khan revelations -- the charter envisages a Nuclear Command and Control system under the Defence Cabinet Committee.
And in another not-so-veiled shot at Musharraf, it proposes that 'a Commission shall also examine and identify the causes of and fix responsibility and make recommendations in the light thereof for incidences such as Kargil.'
As for bilateral ties, 'Peaceful relations with India and Afghanistan will be pursued without prejudice to outstanding disputes.'
Following an April 24 meeting in London to oversee the final version of the draft, Sharif announced: 'You will see us soon in Pakistan. Musharraf has no authority (to keep us in exile)... it is our Pakistan. Pending that whatever possible from outside will be done. Musharraf is only a dictator; his rule is absolutely unfortunate.'
While neither Sharif nor Bhutto would give dates for their proposed return to Pakistan, analysts assume they are hoping that Musharraf, who also faces the ire of Muslim radicals at home for his American ties, will lose further authority and credibility as the election nears.
The Musharraf regime, however, has put up a brave front. Officials noted that despite the charter, the two parties have promised to 'share responsibility, not power,' and warned that both leaders had been indicted in absentia by Pakistani courts and faced jail terms.
'It is another conspiracy to come to power and resume loot and plunder,' sneered Information and Broadcasting Minister Mohammad Ali Durrani on Monday.