The talks also focused on the Pakistan-US strategic dialogue, bilateral trade, counter-terrorism measures and Bhasha Dam.

Kerry also held talks with Prime Minister Nawaz Sharif, who won a convincing victory in May elections.

PM Nawaz described Kerry as a "wonderful friend".

"I am very happy that he is the secretary of state of the United States of America today and I hope to have very good discussions and talks with him," the prime minister said.

Kerry paid tribute to the polls, which marked the first time that an elected civilian Pakistani government completed a full term in office and handed over to another at the ballot box.

"This is a historic transition that just took place. Nobody should diminish it," he told US embassy staff.

"I think President Zardari deserves credit... It is an enormous step forward. It is historic. In the 66 year history of Pakistan that has never happened. So change comes over time," he added.

He later swept into talks with Nawaz, exchanging pleasantries for the cameras before the press were escorted out.

Kerry is later expected to meet the outgoing President Zardari and army chief General Ashfaq Kayani.

Pakistan-US relations, deeply troubled in recent years, have recovered at least somewhat from the crisis sparked by the US killing of Al-Qaeda mastermind Osama bin Laden in May 2011.

Islamabad demands an end to US drone attacks targeting Al-Qaeda and Taliban operatives and bristles over US insistence that it do more to eradicate the threat posed by militants.

Pakistan complains that the United States fails to appreciate the sacrifices it has made in fighting terror, claiming to have lost 40,000 people since 2001.

But US officials say they are hopeful that the onset of a more stable government under Nawaz, with a clear majority, offers a new opportunity to rework relations along realistic objectives.

Pakistan faces mammoth challenges posed by a domestic Taliban insurgency, the external threat posed by Afghan and foreign militants on its soil, a crumbling economy and an energy crisis.

Since winning the May election, Nawaz has said he wants to strengthen Pakistan's relations with Washington, but that the United States must take seriously concerns about drone strikes.

He has made economic growth and resolving the energy crisis the top priority of his new administration, but Kerry will be looking to stress that more must be done on militant havens.