Ruling party chief Asif Ali Zardari declared the decision Thursday was "good news for democracy" in Pakistan.
Announcing a joint coalition statement after two days of talks, he also said the four provincial assemblies should move motions demanding Musharraf take a vote of confidence from lawmakers immediately.
"The coalition further decided that it will immediately initiate impeachment proceedings. The coalition leadership will present a charge sheet against Gen. Musharraf," Zardari told a news conference, along side leaders of the other coalition parties.
Nawaz Sharif, who was ousted as prime minister in Musharraf's 1999 coup and is leader of the second largest coalition party, said, "I agree with what Mr. Zardari has said."
Sharif added: "Pakistan of today is not the Pakistan of the 80s or the 90s. There is a free media and a more active judiciary. Pakistan is a different country" he told reporters.
A spokesman for the ruling party told CBS News under condition of anonymity that "there was no turning back."
Despite his unpopularity in Pakistan, Musharraf has so far resisted calls to step down and insisted he will serve out his current five-year term after he was elected in a contentious parliamentary vote in October.
He dominated Pakistan for eight years, but ceded control of the powerful army last year and has been sidelined in government since the coalition parties trounced his allies in parliamentary elections in February.
Impeaching a president requires a two-thirds majority support of lawmakers in both houses of Parliament. Musharraf loyalists maintain the coalition would struggle to muster it, but Zardari expressed confidence they would succeed.
"We are optimistic that we will succeed," Zardari said. "We hope that 90 percent of the lawmakers will support us."
Tariq Azeem, a spokesman for the main pro-Musharraf opposition party, said it would oppose any impeachment of the president.
"We have backed him and voted from him so we are duty-bound to support him ... We will impose impeachment."
He said there were more pressing issues facing the nation, including "runaway inflation" and sharp hikes in the price of food.
Azeem said he did not think the ruling coalition had the numbers in Parliament to impeach Musharraf, but conceded "things could go either way."
The ruling coalition has a comfortable majority in the National Assembly, or lower house, but Musharraf's supporters retain about half the seats in the Senate, or upper house.
Western diplomats in their immediate reaction warned that this latest twist to Pakistan's politically tumultuous history will raise concerns in Washington where key government leaders will be closely watching for trends related to the future of Islamabad's role in the war on terror along the Pak-Afghan region, reports CBS reporter Farhan Bokhari from Islamabad.
Musharraf cultivated close relations with President George W. Bush and extended support to Washington ranging from an airbase for use by U.S. military aircrafts, to intelligence cooperation as well as the deployment of up to 150,000 Pakistani military troops along the Afghan border.
"If this political storm passes relatively quickly and Pakistan is able to demonstrate that there is a new president who supports the war on terror, I think the US will remain relatively unconcerned over the long term," a European ambassador in Islamabad told CBS News on condition of anonymity. "The question however is if this will short and sweet."