Pakistan on Thursday said it will set up military courts for terror-related cases, as part of an ambitious anti-terrorism plan following a deadly Taliban school attack that killed 150 people.

In a midnight address to the nation after almost 11 hours of deliberations with leaders of political parties, Prime Minister Nawaz Sharif said strong action was needed to root out extremism and warned no mercy would be shown to those behind attacks.

He announced the establishment of military courts as part of the 17-point plan of action -- a week after a six year moratorium on the death penalty was lifted for terror cases in the wake of the deadliest assault by militants in Pakistani history.

"Special courts, headed by the officers of armed forces, will be established for the speedy trial of terrorists," he said.

He said the special courts will operate for two years.

"The Peshawar atrocity has changed Pakistan, we need to eradicate the mindset of terrorism to defeat extremism and sectarianism," said Sharif in the televised speech.

"This horrendous attack has shaken the nation... the terrorists struck the future of this country, when they murdered those children."

The plan also includes cutting financial aid to terrorists and preventing banned organisations from operating with new names.

He also announced the formation of special anti-terrorism force and regularisation of religious seminaries known as madrassas.

The ambitious "plan of action" included a wide range of measures including constitutional ammendments, banning space for terrorists in electronic and print media, destroying their communication systems, and the repatriation of Afghan refugees.

"As a father I can under how heavy these coffins were for their parents," he said referring to the victims of last Tuesday's massacre.

"With their blood, our children have drawn a line between us and terrorists," he said.

The meeting took place at the prime minister's house in Islamabad.

It was called to chart out a plan to combat terrorism after the attack on the military-run school in the northwestern city of Peshawar that killed mostly schoolchildren.

"Only terrorists would be tried in these courts and these would not be used for political objectives," the leader of the opposition Syed Khursheed Shah told AFP.

"The aim of setting up military courts is to ensure the speedy trial of terrorists, there are so many loopholes in our judicial system and it has failed to deliver," Shah said.

He said the all the political parties had agreed to amend the constitution to facilitate the establishment of the military courts.

The meeting also passed a unanimous resolution condemning the attack which was the deadliest in the history of the country.

Following the assault, Sharif ended a six-year moratorium on the death penalty, reinstating it for terrorism-related cases.

Officials on Monday said up to 500 executions were set to take place in coming weeks, after six people were hanged following the reversal of the moratorium.

Pakistan has described Tuesday's bloody school rampage, claimed by the Tehreek-e-Taliban Pakistan (TTP), as its own "mini 9/11," calling it a game-changer in the fight against extremism.

In the wake of the massacre, Sharif said Pakistan would not distinguish between "good Taliban and bad Taliban" as it seeks to crush the scourge of homegrown Islamist militancy.

It has long been accused of playing a "double game" with militants, supporting groups it thinks it can use for its own strategic ends.

The TTP has said the attack was revenge for the killing of their families in an army offensive in the tribal northwest.

The offensive against longstanding Taliban and other militant strongholds in North Waziristan and Khyber tribal agencies has been going on since June.

But a series of fresh strikes since the Peshawar attack, in which dozens of alleged militants were killed, suggest the campaign is being stepped up.

Seven Pakistani Taliban were killed Wednesday in a clash with rangers in the southern port city of Karachi, said a spokesman for the paramilitary force.