The killing has staggered Pakistan. Musharraf had put Pakistan under emergency rule last month and postponed elections. Under pressure from the White House, Musharraf rescheduled the elections for January and lifted emergency rule.
It remains to be seen whether the elections will proceed on schedule and Musharraf has convened an emergency meeting with his senior staff where they are expected to discuss whether to postpone the election, an official at the Interior Ministry said, speaking on condition of anonymity because of the sensitivity of the talks.
The political murder could also unsettle the Bush administration's agenda. Pakistan is the Bush administration's closest ally in the region for fighting terrorists, but Bhutto's death is likely to further destabilize an already volatile situation in Pakistan.
White House spokesman Scott Stanzel said President Bush, who was staying at his Crawford, Texas, ranch, was informed of Bhutto's death within minutes of the announcement in Karachi.
Bush later issued a statement, saying, "The United States strongly condemns this cowardly act by murderous extremists who are trying to undermine Pakistan's democracy. Those who committed this crime must be brought to justice."
The State Department has been heavily involved in attempts to keep the situation in Pakistan calm over the last month and to maintain political stability.
British Foreign Secretary David Miliband voiced shock at Bhutto's killing.
"In targeting Benazir Bhutto, extremist groups have in their sights all those committed to democratic processes in Pakistan. They cannot and must not succeed," Miliband said.
Former Indian Foreign Minister Natwar Singh warned that Bhutto's assassination "is not only bad for Pakistan, it is bad for the entire region."
Bhutto was the daughter of former Pakistani premier Zulfikar Ali Bhutto who was executed. His daughter was flanked by a massive picture of him during her address today.
Benazir Bhutto was a charismatic leader in her own right who twice served as prime minister of the Islamic nation between 1988 and 1996. She was only 35 when first elected Pakistan's leader.
Bhutto has been the target of nine previous assassination attempts.
The Associated Press and Reuters contributed to this report.