In July 1986, Wali Khan and other former National Awami Party members formed the Awami National Party (ANP). Khan was elected its first President and Sindhi Nationalist Rasool Baksh Palijo became the first Secretary General of the party.
The ANP, under Wali Khan's presidency, contested the 1988 national elections in alliance with former rivals the Pakistan Peoples' Party of Benazir Bhutto (Zulfiqar Ali Bhutto's daughter). The ANP's success in the elections was limited to the NWFP and even then only certain regions of that province. In addition, Wali Khan lost his provincial seat to a PPP candidate, a sign of the decline in the ANP's popularity. The ANP-PPP alliance collapsed in 1989 after a perceived snub by PPP Prime Minister Benazir Bhutto and a dispute over ministerial posts and the governorship of NWFP. After joining the opposition, Wali Khan started talks with the Army backed IJI (Islamic Democratic Alliance) and joined the alliance before the 1990 general elections.
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