Sharif, who was in power when the Kargil crisis erupted, also sought a probe into the 1999 conflict with India.
The former Prime Minister said said he was stunned by then Indian Prime Minister Atal Bihari Vajpayee`s remarks in 1999 that the Kashmir issue could be resolved.
Vajpayee proposed back channel diplomacy to resolve long-standing issues and the process was about to start when the "Kargil misadventure dealt a severe blow to our efforts", he said.
The former Prime Minister, who is the chief of main opposition PML-N party, is currently on a three-day visit to southern Sindh province where he made the remarks during an interaction with the media in Karachi yesterday.
He called on the government to also conduct an inquiry into the 2006 killing of Baloch leader Nawab Akbar Bugti in a military operation and the carnage in Karachi on May 12, 2007 that killed over 40 people who tried to rally in support of then-deposed Supreme Court Chief Justice Iftikhar Chaudhry.
Sharif, whose government was deposed in a military coup led by former President Pervez Musharraf in 1999, reiterated his demand for the budgets of the military and the ISI to be placed before Parliament for scrutiny in line with the practice in other democracies.
He said one of his biggest regrets was not taming the powerful military when he was Prime Minister in the 1990s.
The Parliamentary resolution calling for an independent commission to investigate the killing of al-Qaeda leader Osama bin Laden in a US raid on May 2 was the first step towards making Parliament a sovereign body, Sharif said.
"We need structural changes and this inquiry has provided an opportunity to move forward and put the country on the right track, correct its direction by putting our house in order, establish the rule of law and bring all institutions under civilian control," Sharif said.
If the government fixes responsibility for the Abbottabad incident and punishes those found guilty, a message will go out to the world that the people of Pakistan will not brook another embarrassment like the US raid, he said.
Sharif spoke out against the recent alliance forged by the ruling PPP and the PML-Q, both of which are rivals of his PML-N in Punjab and at the centre.