As he confronted a situation that threatened to spiral out of control, President Pervez Musharraf condemned the attack as the work of terrorists and appealed for calm.
"This is the work of those terrorists with whom we are engaged in war," he told Pakistan state TV. "I have been saying that the nation faces the greatest threats from these terrorists. Today after this tragic incident, I want to express my firm resolve."
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Musharraf announced three days of national mourning during which the Pakistani flag will fly at half-mast.
In the immediate aftermath of the attack, the president convened an emergency meeting to discuss the government's reaction. Unnamed sources told the Associated Press news agency that the discussions included whether or not to proceed as planned with January's parliamentary elections.
The US president, George Bush, broke off his holiday at Camp David to condemn the killing of Bhutto, who was the first woman to lead a Muslim state. Bhutto's death marks a severe blow for the US, which had encouraged Bhutto to return from exile and share power with Musharraf.
"The United States strongly condemns this cowardly act by murderous extremists who are trying to undermine Pakistan's democracy," Bush said, adding that those responsible for Bhutto's death "must be brought to justice".
Bhutto was killed as her jeep pulled away from an election rally in Rawalpindi. Standing up in an open-top jeep, she presented a clear target.
Eyewitnesses spoke of hearing gunshots followed by a bomb blast. Bhutto's security adviser, Rehman Malik, said the former PM was shot in the chest and neck. Conflicting reports from Pakistan's interior ministry said Bhutto was killed by the suicide bomber's collision with her jeep.
Bhutto was rushed to hospital for emergency surgery but is reported to have died on the journey at 6.16pm local time (1.16pm GMT). At least 20 others were killed in the attack.
Announcing the death of the Pakistan People's party (PPP) leader outside the hospital, Bhutto's lawyer said: "The surgeons confirmed that she has been martyred."
Bhutto's supporters at the hospital wept, smashed the glass doors and started fires around the hospital periphery. Some were heard to shout "dog, Musharraf, dog" and "killer Musharraf".
Her long-time political rival and former prime minister Nawaz Sharif went straight to Bhutto's bedside. Bhutto and Sharif had been attempting to form a united front.
In a statement, Sharif referred to her as a "sister" and said he "shared the grief of the entire nation". He later demanded Musharraf resign immediately.
"The holding of fair and free elections is not possible in the presence of Pervez Musharraf. After the killing of Benazir Bhutto, I announce that the Pakistan Muslim League-N will boycott the elections," he said.
Members of other opposition parties said her death could trigger civil war.
In Karachi, shop owners quickly closed their businesses as protesters set tyres on fire on the roads, torched several vehicles and burned a petrol station, said Fayyaz Leghri, a local police official. Gunmen shot and wounded two police officers, he said.
One man was killed in a shootout between police and protesters in Tando Allahyar, a town 120 miles north of Karachi, said the mayor, Kanwar Naveed. In the town of Tando Jam, protesters forced passengers to get out of a train and then set it on fire.
Violence also broke out in Lahore, Multan, Peshawar and many other parts of Pakistan, where Bhutto's supporters burned banks, state-run grocery stores and private shops. Some set fire to the election offices of the ruling party, according to Pakistani media.
The violence came at the height of campaigning by opposition leaders. Hours before the assassination, clashes between Sharif supporters and pro-government supporters at a separate rally saw four people killed and three wounded.
As soon as the government learned of Bhutto's assassination it convened an informal discussion on whether or not to go ahead with January's elections as planned. Holding the elections as planned was something for which Bhutto had campaigned hard.
The United Nations announced it was convening an emergency meeting concerning the assassination.
The British foreign secretary, David Miliband, called for "restraint but also unity" as he expressed his shock at Bhutto's death.
"All those committed to a stable future for Pakistan will condemn without qualification all violence perpetrated against innocent people," he said. "In targeting Benazir Bhutto extremist groups have in their sights all those committed to democratic processes in Pakistan. They cannot and must not succeed."
Malik, Bhutto's security adviser, questioned the adequacy of protection for Bhutto.
"We repeatedly informed the government to provide her proper security and appropriate equipment including jammers, but they paid no heed to our requests," he said.
It appears the Musharraf government had been considering ways to strengthen her security, and it forced Bhutto's PPP to cancel a rally in Rawalpindi in November due to security fears.
Today's Rawalpindi rally only went ahead after hundreds of riot police had set up security checkpoints. Rawalpindi is a so-called garrison city and popularly regarded as one of the most secure cities in Pakistan.
On Bhutto's return to the country in October after eight years in exile, a local Taliban leader threatened to unleash a series of suicide attacks.
Although today's attacks bore the hallmarks of Islamist opponents to the moderate Bhutto, critics attacked Musharraf.
In Rawalpindi, grieving supporters tore down the posters of Musharraf's ruling party and attacked police, who fled from the scene. Angry supporters also took to the streets in Peshawar, while in Karachi shop owners quickly closed for business as activists from Bhutto's party burned tyres on the roads.
The assassination came two months after more than 140 people were killed when suicide bombers struck a parade celebrating Bhutto's return from exile in the southern city of Karachi.
Pakistan: Al-Qaeda claims Bhutto's death
“We terminated the most precious American asset which vowed to defeat [the] mujahadeen,” Al-Qaeda’s commander and main spokesperson Mustafa Abu Al-Yazid told Adnkronos International (AKI) in a phone call from an unknown location, speaking in faltering English. Al-Yazid is the main al-Qaeda commander in Afghanistan.
It is believed that the decision to kill Bhutto, who is the leader of the opposition Pakistan People's Party (PPP), was made by al-Qaeda No. 2, the Egyptian doctor, Ayman al-Zawahiri in October.
Death squads were allegedly constituted for the mission and ultimately one cell comprising a defunct Lashkar-i-Jhangvi’s Punjabi volunteer succeeded in killing Bhutto.
Bhutto had just addressed a pre-election rally on Thursday in the garrison town of Rawalpindi when the bomb went off.
She had come to Rawalpindi after finishing a rapid election campaign, ahead of the January polls, in Pakistan's volatile North West Frontier Province (NWFP) where she had talked about a war against terrorism and al-Qaeda.
Reports say at least 15 other people were killed in the attack and several others injured.
As news of Bhutto's death spread throughout the country, there are reports that people have taken to the streets to protest the death of the leader of the PPP, which has the largest support of any party in Pakistan.
In the southern port city of Karachi, Bhutto's hometown, residents reportedly threw stones at cars and burnt tyres.
This post has been edited by Snake Logan: 27 December 2007 - 01:38 PM