Islamabad - Pakistan's President Asif Ali Zardari Monday lifted a more than one-month-long federal rule in eastern province Punjab in a bid to further ease political tensions that threatened the stability of the nuclear-armed country early this month.

The official notification for the undoing of the federal rule, known locally as governor rule, was issued by the government with the approval of President Asif Ali Zardari.

"The president is pleased to revoke the aforesaid proclamation," the notification said. It also said the grounds on which the federal rule was imposed "have ceased to exist," without explaining further.

Zardari imposed the direct rule on February 25 to dismiss the government of the popular opposition party Pakistan Muslim League-Nawaz (PMLN) in Punjab after a controversial court ruling barred the party chief Nawaz Sharif and his brother Shahbaz Sharif from elected office.

Punjab is home to 60 per cent of Pakistan's people and consequently sends the same percentage of law makers to the federal parliament. Being the richest province, it is considered the fountain-head of Pakistani political, economic and security structure.

The imposition of federal rule created political instability and mass protests by the PMLN, which threw its weight behind a wider campaign of the influential legal community struggling for the restoration of the top judge Iftikhar Chaudhry.

Zardari caved in to the demands of lawyers, civil society, rights activists and opposition early last week as Sharif led a rally of tens of thousands of people marching from the eastern city of Lahore towards the capital Islamabad, and reinstated Chaudhry, who was sacked by the former military strongman Pervez Musharraf.

Zardari, who heads the liberal Pakistan Peoples' Party after the assassination of his wife and ex-premier Benazir Bhutto, was also under immense pressure from his Western backers to end the political stalemate and marshal all energies in the fight against Taliban and al-Qaeda militants.

The lifting of direct rule, which came as the second conciliatory measure, will restore the provincial parliament and a government headed by PMLN. The Punjab's governor, who is a representative of the centre, has summoned the parliament on Wednesday to elect the leader of the house.

Pakistani stocks rose by around three per cent amid expectations of political stability in the country, despite a terrorist attack by a group of militants on a police training school in the outskirts of Lahore.

Military commandoes and police elite forces arrested three and killed four assailants to end the eight-hour siege that left several recruits and civilians killed and around 100 injured. (dpa)