Musharraf had vowed before talks with Blair to protest over a British think-tank report alleging that Islamabad's ISI intelligence service indirectly supports extremism in Afghanistan, Iraq and Britain.
"President Musharraf accepted straight away that this document was not a reflection of British government policy so there was no need to discuss it any further," a Blair spokesman told AFP after the talks.
The issue had threatened to cast a shadow over the two-hour meeting at Chequers, the prime ministerial retreat just outside London. The paper, written for the Defence Academy, a Ministry of Defence think-tank, alleges that the ISI is fanning extremism by secretly backing the coalition of religious parties in Pakistan known as the MNA.
Speaking in a BBC interview beforehand, Musharraf had denied the suggestion. "Absolutely, 200 percent, I reject it," he told the British Broadcasting Corp "I take exception seriously, and I would like to talk about it (with) Prime Minister Tony Blair when I meet him," the president said.
Blair voiced gratitude to Musharraf for his backing in the US-led war on terrorism, while the Pakistani leader thanked Blair for Britain's help during the devastating earthquake in his country last year, said the spokesman. Musharraf, meanwhile, vowed to help stop the Taliban crossing the border into southern Afghanistan, where they are mounting fierce resistance to Nato troops led by Britain.
"Musharraf said he was determined to deal with the Taliban and reduce the level of cross-border activity," said the spokesman. Blair had underlined that "we and Nato were in Afghanistan for the long haul," and said "he was grateful for Pakistan's support for our objectives there," he added.
Earlier, the BBC cited a leaked paper written by a senior military official linked to Britain's foreign intelligence service MI6 who served on a fact-finding mission to Pakistan in June which interviewed army officers and academics.
"Indirectly, Pakistan, through the ISI, has been supporting terrorism and extremism, whether in London on 7/7 (the July 7, 2005 bombings on London's transport network) or in Afghanistan or Iraq," the report reads.
The policy paper proposes using military links between British and Pakistani armed forces to persuade Musharraf to step down as leader of the country, accept free elections, withdraw the army from civilian life and dismantle Pakistan's intelligence service, the ISI.
President Musharraf earlier responded angrily to the suggestions, saying: "I would like to tell this Ministry of Defence spokesman to say the Ministry of Defence maybe should be dismantled before the ISI is dismantled."
He said the ISI was a "disciplined force" which "won the Cold War for the world", adding: "We don't like anybody advising us to dismantle ISI, least of all the (British) Ministry of Defence."
The report was described as being written by a senior military official linked to Britain's foreign intelligence service MI6, and part of a fact-finding mission to Pakistan in June. A spokeswoman for the British defence ministry said the paper "in no way represent the views of either the MoD or the government".
She said the author of the report "suspects that (it has) been released ... precisely in the hope that (it) would cause damage to our relations with Pakistan."
"Pakistan is a key ally in our efforts to combat international terrorism and her security forces have made considerable sacrifices in tackling al Qaeda and the Taliban."
OSAMA IS ALIVE Musharraf, in Washington, claimed that al Qaeda leader Osama bin Laden, reported last week to have died, is alive and hiding in Afghanistan, in an interview with The Times published on Thursday. "It's not a hunch," Musharraf said, speaking from a hotel in New York.
The newspaper, without directly quoting President, said he believed bin Laden was hiding in the eastern Afghan province of Kunar. "Kunar province borders on Bajaur Agency. We know there are some pockets of al Qaeda in Bajaur Agency. We have set a good intelligence organisation," he told The Times.
Musharraf also said he had nothing to confirm reports bin Laden may have died from typhoid fever that emerged from a French intelligence memo citing Saudi sources that was leaked to a newspaper at the weekend.
"I don't know" about bin Laden having died, he said. "Unless I am sure I never say anything. "If they have some source they should tell us. At least our intelligence does not know anything." The report met with widespread scepticism, with French, Saudi Arabian, US and Pakistani officials saying it could not be confirmed.
WHOLE TRUTH President Pervez Musharraf defended his decision to publish memoirs and said everything in his book "In the Line of Fire" was true.
"Yes, there are controversies over some parts of the book. That's normal," he told reporters at London's Heathrow airport after arriving in England for a two-day visit. "But I know one thing and that whatever I have said in the book is the truth, the whole truth and nothing but the truth, and I stand by it."
"Now with the controversies of whether I should have written or not written--well, why shouldn't I have written? It is more than for myself," Musharraf said.
"I thought that because of the world looking at me inquisitively, personally, I thought through me I could project the reality of Pakistan and what Pakistan stands for and clear all the misconceptions."
British Foreign Minister Margaret Beckett played down fears that an intelligence report published by the BBC on Wednesday, which criticised Pakistan's ability to fight terrorism, would overshadow the visit. "I hope not. I don't see that it necessarily should because it is not an official government document in any way," Beckett told the BBC.
The author of the report heaped blame for a failure to win the war on terrorism on Pakistan, alleging that its intelligence agency, ISI, indirectly supported the Taliban.