The decision was taken at a cabinet meeting presided over by Prime Minister Shaukat Aziz on Wednesday.
"Hopefully, the present assemblies will complete their term and since the tenure of the president expires on November 15, his re-election will be sought from the present assemblies in accordance with constitutional provisions," Information Minister Mohammad Ali Durani told reporters after the meeting.
He, however, did not say whether Musharraf would continue to hold the dual post of the Chief of Army staff as well as the head of the state.
The cabinet was briefed on the constitutional and legal aspects of the presidential elections by a team of experts led by Aziz's senior advisor Sharifuddin Pirzada, a Musharraf confidante.
The Pakistan President's present five-year term would end almost a week before the completion of the tenures of the sitting assemblies on November 16, 2007.
"The cabinet was told that as per the constitution, the assemblies would complete their term on November 16. The president should be elected between September and October 2007 and the interim set-up will be put in place in line with the constitutional provisions," Durani said.
The announcement of Musharraf's re-election follows the conference of Crops Commanders held on January 16, which was addressed by him. The President's re-election was discussed at the meeting.
Also Musharraf had discussed the issue with members of the cabinet at a dinner hosted by Aziz last Friday.
The decision was a forgone conclusion because under article 41(1), the president's tenure would expire on November 15, 2007 and he needed to be re-elected before October 15 as the rules say that the election should take place with in 30 days.
Significantly, all the Ministers of Muthahida Quami Movement, a key ally in the ruling Pakistan Muslim League-Q were conspicuous by their absence at the cabinet meeting.
However, Minister for Ports and Shipping Babar Khan Ghauri, who is one of the senior MQM leaders, played it down saying that it was purely a coincidence that all the ministers belonging to his party were busy, attending the marriage of party leader Adil Siddiqui's sons till late Wednesday night.
Musharraf's election in a referendum in 2002 was endorsed by the present assemblies after general elections in 2002.
Opposition parties which threatened to resign if he went ahead with the re-election plans say that it is an indication that Musharraf was not certain about pro-military alliance returning to power in general elections.
The government said if the opposition parties resign, it would hold by-polls and fill the vacancies.
The opposition parties have termed the cabinet's decision to re-elect him by the sitting assemblies as "unconstitutional, undemocratic and unethical."
Muttahida Majlis-e-Amal Deputy Secretary General Liaquat Baloch said it was the responsibility of all political parties to stop Musharraf's re-election.
Baloch a senior leader of the Jamat-e-Islami said a joint struggle by the opposition parties was required for the ouster of President Musharraf. "We will make every effort to stop the re-election of Musharraf," he said.
The Pakistan People's Party, headed by former Prime Minister Benazir Bhutto, also condemned the decision of the federal cabinet and termed it unconstitutional and immoral.
"It is a mockery of democracy to say that a parliament in its dying days has the right to impose on the people a president for the next five years when it is not in place," PPP spokesman Farhatullah Babar said.
He said the decision would bring all opposition parties closer for a joint struggle against dictatorship. "The cabinet decision shows the country is not run by the cabinet but by agencies," he said.
Ahsan Iqbal Information Secretary of the Pakistan Muslim League-N headed by former Prime Minister Nawaz Sharif questioned how a parliament with a five-year tenure could give someone a ten-year tenure.
The cabinet decision also showed that the government could not face the people in a fair and free election. "Musharraf has already violated the Constitution three times on the election of president," he said.