Pakistan said on Thursday that it will set up military courts for terror-related cases, 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 is needed to root out extremism and warned that no mercy will be shown to those behind attacks.

He announced the establishment of military courts as part of the 17-point plan of action. The move came 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," Sharif said 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 organizations from operating with new names. He also announced the formation of a special anti-terrorism force.

The ambitious "plan of action" includes constitutional amendments, banning space for terrorists in electronic and print media, destroying their communication systems, and repatriating Afghan refugees.

"As a father, I can understand how heavy these coffins were for their parents," he said, referring to the victims of the Dec 16 massacre.