LAHORE, Pakistan (AP) – Pakistani opposition leader Benazir Bhutto demanded the resignation of U.S.-backed President Gen. Pervez Musharraf on Tuesday, dashing Western hopes that the two moderate leaders would form an alliance to confront strengthening Islamic extremists.

Bhutto, just placed under house arrest for the second time since her return from exile, said she was working to forge a partnership with Nawaz Sharif, the man overthrown as prime minister in a 1999 coup by Musharraf.

Her call, which could see Pakistan’s two main opposition parties joining, raised a new threat for Musharraf, a key U.S. ally who faces growing pressure at home and abroad to end emergency rule.

It further complicated matters for Washington, which has criticized Musharraf’s recent crackdown on dissent but sees him as a dependable partner in the fight against al-Qaida. A senior U.S. envoy headed to Pakistan was expected to reiterate the U.S. calls for an end to emergency rule, which has led to thousands of arrests and a clampdown on the media.

The White House said it still hoped Pakistan’s “moderate elements” could unite, but Bhutto said she would no longer try to work with Musharraf.

“The international community needs to decide whether it will go with one man or the people of Pakistan,” Bhutto told The Associated Press by telephone from the house where she is being held in the city of Lahore.

Musharraf has defended emergency rule as needed to curb political unrest that he says is hampering the government’s fight against Taliban- and al-Qaida-linked militants, who have been gaining the upper hand in the country’s northwest along the border with Afghanistan.

Critics contend the Nov. 3 emergency decree was a cover to oust independent-minded judges who had crimped Musharraf’s powers in this country of 160 million people. They call his move outright martial law since authorities now have unchecked power to detain opponents and military courts can try civilians for treason.

Bhutto, a secularist who has served as prime minister twice, is trapped in a padlocked house in Lahore, surrounded by thousands of riot police, trucks loaded with sand and a row of metal barricades lined by barbed wire. Police said Bhutto would be kept there seven days.

Authorities imposed the detention to block her from staging a protest procession to the capital, Islamabad. The march went ahead but was quickly stopped by police, and security forces also clashed with anti-government protesters in other cities.

Tuesday’s events were in many ways a replay of Friday, when police sealed Bhutto inside her Islamabad villa for a single day and rounded up hundreds, possibly thousands, of her supporters to stop a mass rally she had called outside the capital.

Bhutto said thousands of her supporters were again rounded up Tuesday, although officials denied detentions on such a large scale. This time, Bhutto’s reaction was much sharper – calling the crackdown the “breaking point” in her relations with Musharraf.

“I’m calling for Gen. Musharraf to step down, to quit, to leave, to end martial law,” she said in a phone call with a group of journalists. “Pakistan is a nuclear-armed country. We cannot afford this kind of chaos and instability,” Bhutto said.

“I could not serve as prime minister with Gen. Musharraf as president. I wish I could,” she added.

Musharraf countered that Bhutto “has no right” to ask him to resign, and said in an interview with The New York Times on Tuesday that she has an exaggerated view of her popular support.

“Let’s start the elections and let’s see whether she wins,” Musharraf was quoted as saying in an article posted on the Times’ Web site.

Bhutto said she would work to forge a broad opposition alliance including Sharif, a longtime rival and former prime minister who shares her desire to end military rule.

Sharif attempted to return to Pakistan in September to prepare his party for the elections, but he was immediately deported despite a Pakistani Supreme Court ruling that he had an “inalienable right” to stay.

Speaking to AP from exile in Saudi Arabia, Sharif welcomed Bhutto’s comments and urged opposition parties to unite against Musharraf. “That is the need of the hour because single-handedly to fight dictatorship is going to be a difficult task,” he said.

Sharif headed two socially conservative governments in the 1990s and presided over Pakistan’s first nuclear tests. Although a secularist, he has worried American officials by allying recently with Islamist parties bitterly opposed to Musharraf’s alliance with the U.S.

He said he had written a letter to Bhutto three days ago offering to work together for democracy and was awaiting a reply.

Bhutto told AP she had tried unsuccessfully to contact Sharif but had spoken to one of his party colleagues. She added that she also contacted a prominent Islamist leader and chiefs of some ethnic nationalist parties.

Musharraf, whose popularity has plummeted this year amid growing resentment over prolonged military rule, has set no time limit for emergency rule. He signaled Sunday that he wants to hold elections while keeping his ban on rallies and suspension of other rights, raising major doubts about the vote’s credibility.

So far, unrest during 11 days of emergency rule caused little bloodshed other than a few injuries from police using clubs to break up limited street protests. But analysts warn that growing disaffection among opposition supporters could spark wider violence.

In the southern city of Karachi, Bhutto supporters angered by her detention fired on two police stations, and police used tear gas to disperse them. A 9-year-old boy and a woman were wounded in the crossfire of a gunbattle between demonstrators and police, witnesses said.

In unusually strong criticism of a key ally, U.S. Ambassador Anne Patterson on Tuesday described emergency rule as an “ominous development.”

“The United States is urging your government not to throw away in weeks what it has taken years to achieve,” she said in a speech at an elite military university in Islamabad, according to an embassy statement.

She called for the release of jailed opposition activists and removal of restrictions on the media.

Deputy Secretary of State John Negroponte is expected to deliver a similar message when he visits Pakistan this week, a trip the embassy said was planned before emergency rule.

“We remain concerned … (but) we are hopeful that moderate elements would join together,” White House spokeswoman Dana Perino told reporters traveling with President Bush to Indiana.

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Associated Press writers Zarar Khan in Lahore and Stephen Graham and Matthew Pennington in Islamabad contributed to this report.

AP-ES-11-13-07 1630EST