Ms Bhutto - the first woman PM in an Islamic state - was leaving an election rally in Rawalpindi when a gunman shot her in the neck and set off a bomb.
At least 16 other people died in the attack and several more were injured.
President Pervez Musharraf condemned the killing and urged people to remain calm but angry protests have gripped cities across the country.
Security forces have been placed on a state of "red alert" nationwide.
There were no immediate claims of responsibility for the attack. Analysts believe Islamist militants to be the most likely group behind it.
Ms Bhutto, leader of the Pakistan People's Party (PPP), had served as prime minister from 1988-1990 and 1993-1996, and had been campaigning ahead of elections due on 8 January.
It was the second suicide attack against her in recent months and came amid a wave of bombings targeting security and government officials.
Nawaz Sharif, also a former prime minister and a political rival, announced he would boycott the elections and called on President Musharraf to resign.
Earlier, he said the death was a tragedy for "the entire nation".
The United Nations Security Council has begun emergency consultations on the killing.
Scene of grief
Ms Bhutto's remains have been removed from Rawalpindi General Hospital in a van. They are reportedly being taken to the city's airport.
| || Extremist groups have in their sights all those committed to democratic processes in Pakistan |
UK foreign secretary
The attack occurred close to an entrance gate of the city park where Ms Bhutto had been speaking.
Police confirmed reports Ms Bhutto had been shot in the neck and chest before the gunman blew himself up.
She died at 1816 (1316 GMT), said Wasif Ali Khan, a member of the PPP who was at hospital.
Some supporters at the hospital wept while others broke into anger, throwing stones at cars and breaking windows.
Protests erupted in other cities as news of the assassination spread with unconfirmed reports of several deaths in clashes between demonstrators and security forces:
- A number of cars were torched in Karachi, capital of the PPP's heartland province of Sindh, where shots were also reportedly fired
- Cars were reportedly set on fire in Hyderabad, also in Sindh Province
- Police in Peshawar, in the north-west, used batons and tear gas to break up a rally by protesters chanting anti-Musharraf slogans
- Unrest was also reported in Quetta, Multan and Shikarpur
Mr Musharraf has announced three days of national mourning.
Mr Sharif said there had been a "serious lapse in security" by the government.
But an old friend of Ms Bhutto, Salman Tassir, told the BBC World Service he did not think criticism should be directed at the government.
"There have been suicide attacks on Gen Musharraf also," he told Newshour.
"I mean it is extremism and the fanatics who are to blame."
Earlier on Thursday, at least four people were killed ahead of an election rally Mr Sharif had been preparing to attend close to Rawalpindi.
Ms Bhutto's death has plunged the PPP into confusion and raises questions about whether January elections will go ahead as planned, the BBC's Barbara Plett in Islamabad says.
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Father led Pakistan before being executed in 1979
Spent five years in prison
Served as PM from 1988-1990 and 1993-1996
Sacked twice by president on corruption charges
Formed alliance with rival ex-PM Nawaz Sharif in 2006
Ended self-imposed exile by returning to Pakistan in October
Educated at Harvard and Oxford
The killing was condemned by India, the US, the UK and others.
Ms Bhutto returned from self-imposed exile in October after years out of Pakistan where she had faced corruption charges.
Her return was the result of a power-sharing agreement with President Musharraf
He had granted an amnesty that covered the court cases she was facing.
But relations with Mr Musharraf soon broke down.
On the day of her arrival, she had led a motor cavalcade through the city of Karachi.
It was hit by a double suicide attack that left some 130 dead.
Rawalpindi, the nerve centre of Pakistan's military, is seen as one of the country's most secure cities.
| || It was only a matter of time before the darker forces... carried out this action |
Many analysts say attacks like those on Thursday show the creeping "Talebanisation" of Pakistan.
Radical Muslims calling for Islamic law, and fiercely opposed to the US, have become increasingly active in Pakistani politics in recent years, analysts say.
THE ASSASSINATION OF BENAZIR BHUTTO1. Benazir Bhutto had addressed a rally of thousands of supporters in Rawalpindi's Liaqat Bagh Park
2. As her convoy was leaving the park via the rear gate onto Murree road, she was shot twice in the neck and chest
3. The gunman then blew himself up killing at least 16 people
4. Mrs Bhutto was taken to Rawalpindi General Hospital, but was pronounced dead at 1816 local time.
Published: 2007/12/27 18:23:58 GMT
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