Sharif says parliament to take the decision on 60 judges, including chief justice.
"With a little give-and-take they have been able to set aside their differences," Kamal Hyder, Al Jazeera's correspondent in Islamabad, said.
But the coalition partners are still divided over the president.
"We will continue our struggle to rid this new democratic era of Pervez Musharraf," said Sharif, whom then-General Musharraf forced from power in a coup in October 1999.
"We will continue our struggle to rid this new democratic era of Pervez Musharraf"
Sharif's party is pushing for Musharraf's impeachment, while the PPP only wants him stripped of extra-constitutional powers passed under emergency rule last November.
The PPP also wants to link the restoration of judges to a proposed package of judicial reforms that could limit the powers of Chaudhry and prevent judges from getting involved in politics.
Zardari accused the deposed chief justice and other judges of "playing politics" and failing to deliver justice to him during the years he spent in jail on alleged corruption charges.
Musharraf removed Chaudhry when the supreme court was preparing to rule on the legality of his October election by the previous parliament to a new five-year presidential term.
Musharraf accused Chaudhry of corruption and conspiring against him and political plans.
Chaudhry is considered by many as an "independent-minded" judge, who has blocked numerous government privatisation deals and investigated complaints that the country's spy agencies were holding opposition activists secretly under the pretext of the so-called "war on terror".
The PML-Q, Pakistan's main pro-Musharraf party, has said it will work on its own proposal for restoring the judiciary and consider joining a new ruling coalition if the current one breaks up.