Musharraf said that he would return to politics, form a new political party and stand for parliament at the next general election in 2013.
His comments, given in an interview with the BBC in London, were greeted with scorn from political rivals.
“The former president is a coward man and he will not return to Pakistan,” a leader of Pakistan's largest Islamic party Jamat-i-Islami, Liaqat Baloch, told AFP.
“The entire country is engulfed in a serious crisis because of the culture that Musharraf introduced in Pakistan.
“Neither does he enjoy public support nor will he find courage to return to Pakistan,” he added.
The 67-year-old Musharraf said he was not scared of the threat of legal action against him and insisted that he had to try to lift Pakistan out of its “pathetic situation”.
“The brave former army commando preferred to run away instead of facing courts of law in Pakistan,” Siddiqul Farooque, spokesman for Pakistan Muslim League (Nawaz), told AFP.
Musharraf ousted former prime minister Nawaz Sharif in a bloodless coup in 1999. He was president from 2001 and has mostly lived in London since resigning in 2008.
“He (Musharraf) lives in fool's paradise if he thinks he will again become Pakistan's president,” Farooque said, referring to his current status as “hibernation”.
He said: “Musharraf must remember that whenever he gets out of this hibernation and comes back to Pakistan, he will have to face the courts.”
But Musharraf said possible legal cases against him were not putting him off a swift return. However, he admitted his popularity had waned but said it was still strong among the majority of Pakistanis who do not vote.
“Two hundred per cent I will participate in the next election. Standing for myself. Standing for a party that I'll create,” Musharraf said Friday in London, where he lives in exile.
“I do intend creating a new party because I think the time has come in Pakistan when we need to introduce a new political culture: a culture which can take Pakistan forward on a correct democratic path, not on an artificial, make-believe democratic path.
“I have fought wars, I have faced dangers and I'm a lucky man. I'll try my luck again and I'm not scared of that,” he said.
A former minister in his government welcomed the announcement.
“Musharraf's return to politics is the need of the hour and only he can safeguard Pakistan and its interests,” Dr Sher Afgan Niazi said, adding that the former president had the “vision and wisdom” to save the country.
“He (Musharraf) is an asset for this country, who did a great job by protecting vital national interests and strengthening economy and social sector during his tenure.”