"We appreciate recent peace initiatives and hope that Pakistan-India talks will achieve the desired results and lead to just settlement of disputes," he said.
Speaking at a state banquet at the Aiwan-e-Sadr, he lauded President Pervez Musharraf's wisdom and sagacity and added, "we have great hopes of regional peace from your qualities."
Riyadh, he said, is for a just settlement of dispute between Pakistan and India for permanent peace in South Asia.
Prime Minister Shaukat Aziz and country's top leadership attended the banquet.
King Abdullah praised Islamabad's longstanding position on the Palestinian issue and said, "Pakistan's honourable position is a source of pride for every Muslim."
He said Saudi Arabia and Pakistan have a strong relationship and both are working to "establish a true economic partnership for development and prosperity of our people - apart from common faith, our bonds of relationship are based on economic and investment ties."
King Abdullah added, "Saudi Arabia-Pakistan relations are genuine and our visit will impart strength and depth to this relationship."
The visiting leader appreciated Pakistan's achievements in the fields of science and technology. President Musharraf, in his speech, said both countries have a firm commitment to fight terrorism. He said the scourge of terrorism posed a danger to all faiths and societies.
"Nothing can justify disruption of stability, progress and development in a society and killing of innocent people, Musharraf said while regretting acts of misguided individuals who have maligned the noble religion of Islam that stands for peace, tolerance and compassion.
The President also underlined the need for rooting out the bane of extremism from societies through education and reforms.
Musharraf stressed the need for addressing the long-standing unresolved political disputes that mainly involved the Muslim world.
"There is an urgent need to heal the festering wounds of Palestine and Kashmir that have caused so much pain and sufferings among the Muslims," he added.
The durable peace and tranquillity in the Middle East demands a just and honourable solution of the Palestine issue, the President said and praised King Abdullah's initiative in Beirut, three years ago which defined the essentials for peace based on realism and justice.
"Nothing should be allowed to derail efforts for vacation of occupied territories and establishment of an independent homeland for the Palestinian people", Musharraf added.
About the ongoing peace process with India, he said Pakistan was working for an environment of peace in South Asia and engaged in sincere efforts to resolve the lingering Kashmir dispute that has been at the heart of conflict and tension between the two nuclear neighbours.
Musharraf emphasised using the improved relations to find a Just solution to the dispute, acceptable to all the parties - Pakistan, India and the Kashmir people.
The President lauded the Saudi King for his strong commitment towards the resolution of outstanding disputes between Pakistan and India including Kashmir and expressed the hope that his recent visit to India would encourage peace process between the South Asian states.
On Afghanistan, Musharraf said Pakistan fully supports the government of President Hamid Karzai and is contributing to international efforts for rehabilitation and reconstruction in that country.
He said friendship between Pakistan and Saudi Arabia is constant and transcends the changing international environment and expediency of international politics.
"We maintain and consolidate our co-operation with Saudi Arabia as a cherished value of our foreign relations and international outlook," the President added.
He said the two countries have always stood by each other and specially referred to the prompt Saudi support in the aftermath of the devastating October earthquake.
Musharraf expressed the hope that the visit of the Saudi King would provide new impetus to the multi-faceted co-operation between the two countries and raise their comprehensive and strategic partnership to higher levels.