Pakistan has seen protests despite widespread detentions |
Mr Bush said he told Gen Musharraf it was not right to continue as both president and head of the military.
But he also noted that Gen Musharraf had been an "indispensable ally".
Pakistan's former Prime Minister Benazir Bhutto has called for a rally on Friday against the state of emergency imposed by Gen Musharraf.
However, another former Prime Minister, Nawaz Sharif, told the BBC that Ms Bhutto must also demand the reinstatement of the chief justice and other judges if the opposition is to unite.
Mr Bush spoke by phone to President Musharraf for 20 minutes.
"My message was that we believe strongly in elections and that you ought to have elections soon and you need to take off your uniform," Mr Bush told reporters.
"You can't be the president and the head of the military at the same time, so I had a very frank discussion with him."
Ultimatum
The US Deputy Secretary of State, John Negroponte, told Congress that Mr Bush had spoken of Gen Musharraf as an important ally.
"No country has done more in terms of inflicting damage and punishment on the Taleban and the al-Qaeda since 9/11.... Their record is quite impressive."
But, he warned, "the longer the situation goes on in its present form, the more difficult it's going to become".
In Pakistan, Ms Bhutto has issued what correspondents say is an ultimatum to President Musharraf to end emergency rule.
She repeated plans for a rally on Friday, despite an official ban, and called for a "long march" next week unless Gen Musharraf changed course.
She insisted that he restore the constitution, hold elections and resign as head of the army, and is demanding the release of lawyers, judges and activists detained in the last few days.
Gen Musharraf imposed emergency rule on Saturday after months of unrest.
The authorities have warned that police will not allow Friday's demonstration in Rawalpindi, the country's main garrison town, to go ahead.
The city's mayor, Javed Akhlas, said: "We will ensure that they don't violate the ban on rallies, and if they do it, the government will take action according to the law."
He told the Associated Press there was a "strong threat" of another suicide bomb attack against Ms Bhutto, who survived an assassination attempt in Karachi on 18 October that killed more than 140 people.
Until now, protests across the country have been limited in scale, with Ms Bhutto refraining from urging supporters of her Pakistan People's Party (PPP) - the country's leading political group - onto the streets.
But correspondents say a huge popular rally could raise the stakes dramatically in the country's political crisis.
Emergency 'to end'
Ms Bhutto was speaking after meeting other opposition groups in Islamabad - though some significant players were missing.
The important MMA (United Council of Action) - an alliance of Islamic parties - and the PML-N party of former Prime Minister Nawaz Sharif were not there.
Nor was the Movement for Justice Party of former cricket star Imran Khan.
Mr Khan was one of several leading politicians to be put under house arrest following the decree.
A top official from President Musharraf's ruling party has said emergency measures might come to an end in "two to three weeks".
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