The surprising announcement comes as Pakistani army officials announced they were pulling their troops out of the North Waziristan region as part of a "peace deal" with the Taliban.
If he is in Pakistan, bin Laden "would not be taken into custody," Major General Shaukat Sultan Khan told ABC News in a telephone interview, "as long as one is being like a peaceful citizen."
Bin Laden is believed to be hiding somewhere in the tribal areas of Pakistan, near the Afghanistan border, but U.S. officials say his precise location is unknown.
In addition to the pullout of Pakistani troops, the "peace agreement" between Pakistan and the Taliban also provides for the Pakistani army to return captured Taliban weapons and prisoners.
"What this means is that the Taliban and al Qaeda leadership have effectively carved out a sanctuary inside Pakistan," said ABC News consultant Richard Clarke, the former White House counter-terrorism director.
The agreement was signed on the same day President Bush said the United States was working with its allies "to deny terrorists the enclaves they seek to establish in ungoverned areas across the world."
The Pakistani Army had gone into Waziristan, under heavy pressure from the United States, but faced a series of humiliating defeats at the hands of the Taliban and al Qaeda fighters.
"They're throwing the towel," said Alexis Debat, who is a Senior Fellow at the Nixon Center and an ABC News consultant. "They're giving al Qaeda and the Taliban a blank check and saying essentially make yourselves at home in the tribal areas," Debat said.