Pakistan pledged Monday to restore its deposed top judge and end a crackdown on activists, caving in under mass protests in a bid to defuse a crisis that took the nation to the brink of chaos. Main opposition leader Nawaz Sharif welcomed what he called an historic achievement and promptly called off a mass protest march, which had been due to descend on the capital Monday, averting widespread fears of unrest. Prime Minister Yousuf Raza Gilani's climbdown, in a dawn address to the nation, followed overnight talks with President Asif Ali Zardari and the army chief determined to avert chaos in the central front in the "war on terror". "I announce today that Iftikhar Chaudhry and all other deposed judges will be reinstated from March 21," when the current chief justice retires, he said. Zardari has come under massive Western pressure to defuse a standoff with Sharif , who urged the masses to rise up against the government to demand that judges sacked under emergency rule be reinstated. "It is a historic day, a great day which will change the country's destiny," said Sharif from inside his car in the central city of Gujranwala, were he was showered with rose petals and mobbed by a sea of jubilant supporters. "We are now calling off this long march," he said, following discussions with lawyers and political allies including cricket hero Imran Khan. Gilani also overturned a repressive government clampdown designed to foil the protest march, ordering authorities to release all those arrested and declaring the immediate lifting of a ban on public demonstrations. "I want to congratulate the nation. Let us celebrate this with dignity," he said in an apparent plea for peaceful celebrations, one day after protests saw the worst street violence since the crisis unfolded nearly three weeks ago. The United States welcomed Gilani's announcement as a move to "defuse a serious confrontation" and a "substantial step towards national reconciliation," in a statement issued by its embassy in Islamabad. But a spokesman for Chaudhry sounded a note of caution. "There have been so many broken promises in the past. A lot of mistrust has been created. We have to see the official notification," Athar Minullah told reporters, insisting repeatedly that he was expressing his own opinion only. The former chief justice was dismissed by ex-military ruler Pervez Musharraf on November 3, 2007 along with 60 other judges, 53 of whom have since been reinstated. The former military ruler had feared the judges would declare him ineligible to contest a presidential election while in military uniform. He had initially fired Chaudhry in March 2007 but he was reinstated on a supreme court appeal. His dismissal led to a countrywide protest that ultimately forced Musharraf to quit in August 2008, and his full reinstatement was a significant concession from a government that has reneged on previous pledges to do so. The stand-off between the government and opposition lawyers and activists, who have campaigned for Chaudhry's restoration, has threatened to destabilise further the nuclear-armed frontline state fighting the Taliban and Al-Qaeda. Sharif defied house arrest to lead thousands on Sunday in a banned protest through Lahore, where protesters dismantled barricades and fought pitched street battles with riot police armed with tear gas. In his package of concessions, Gilani said the government had decided to file a petition against the February 25 supreme court ruling that banned Sharif and his brother Shahbaz Sharif from contesting elections. But analysts warned that the move pushed a weakened president deeper into the pocket of the army, which has ruled Pakistan for more than half its 62 years. "The judges' restoration will restore people's confidence in democracy but the army chief's role as mediator between the government and the opposition will increase Zardari's dependence on the army," said Tauseef Ahmed Khan. "The confrontation has weakened Zardari, improved Nawaz Sharif 's popularity and made him far stronger," said the communications expert.