In their remarks after the meeting, both the leaders expressed total satisfaction over the ties between the two countries and pledged to explore ways and means to further enhance their relations, especially in trade and economic field.
Information and Broadcasting Minister Sheikh Rashid, Minister of State for Foreign Affairs Makhdoom Khusro Bakhtiar, Minister of State for Tourism Sumaira Malik and other high officials assisted the president in the meeting.
The president described the talks as "wonderful interaction" which was held in most cordial and frank manner.
"We covered all bilateral issues relating to political understanding and mutually beneficial economic and commercial relations," he added.
The Italian prime minister reciprocated the sentiments expressed by the president and said both the sides have complete 'consonance' of views on all subjects.
He also appreciated President Musharraf for his initiatives on fighting the twin menace of terrorism and extremism and peace in the region.
The Italian prime minister, while speaking on behalf of European Union countries, also appreciated President Musharraf for moderate policies in the region.
He expressed the firm hope that both the countries would come more closer in the days ahead and their bilateral ties would be further strengthened.
Official sources said both the sides exchanged views on regional and international issues, including the fight against terrorism, Pakistan-India dialogue, reconstruction in Afghanistan and expansion of UN Security Council.
Pakistan and Italy also signed agreements on fight against drug trafficking and tourism co-operation after the talks.
The two leaders emphasised upon the need to expand trade volume between both the countries that currently stood at US $700 million.
Italy has been a major investor in Pakistan with many Italian companies running sizeable operations in the country. These companies have also been involved in the construction of mega infrastructure projects in Pakistan, including the largest hydropower project in the country - Tarbela Dam.
About seven Pakistani companies and their Italian counterparts also signed memorandum of understanding (MoU) after a trade and investment conference in Rome on Tuesday where President Musharraf was the chief guest.
President Musharraf also extended an invitation to the Italian prime minister to visit Pakistan. The prime minister accepted the invitation.
President Musharraf also extended birthday wishes to the prime minister and congratulated him on the birth of his grandson.
ADDRESS TO SENATE: Later, addressing the Italian Senate President Musharraf urged the European Union (EU) to help in resolving political disputes and assist in the economic development of the Islamic world to help in promoting inter-faith harmony.
"EU is a strong emerging bloc and when we talk of inter-faith harmony, you (EU) must contribute by resolving political disputes," the President said in response to a question during his address.
He urged the 25-member union to use its influence in resolving the lingering Palestinian issue.
Similarly, the president said the EU could contribute tremendously in economic development within the Islamic and the developing world.
The president supported the entry of Turkey into the EU and said it could act as a bridge between the Islamic world and the West and the EU and the OIC.
In his hour-long speech, President Musharraf touched upon various domestic and international issues.
To a question, he said, Pakistan was a strong believer in Pan-Islamism and wanted to use its strong position to harmonise future path of Islamic countries and the entire world.
"It is the Pan-Islamism in which Pakistan believes in and in this Pan-Islamic context Pakistan happens to enjoy a very strong position, he said.
Likewise, the president added, Pakistan also enjoys the geo-strategic position in the region and has a central role to play in bringing harmony to the entire region.
On the domestic issues, the president said every country has its own peculiar environment and "You can't see democracy in Pakistan with Italian eyes."
He said democracy in Pakistan had never functioned and between 1988-99, no government could complete its tenure.
He said four prime ministers were dismissed by the presidents elected by their own parties and three presidents were shown the exit door.