Ms Bhutto was shot in the neck and chest by a suicide bomber who then blew himself up, moments after the former prime minister addressed supporters in the city of Rawalpindi.
As condemnation poured in from around the world, opposition leaders in Pakistan – a key ally of Britain and the West in the war on terror – warned of a "very real danger" of rival factions tearing the country apart.
Riaz Malik, of the opposition Pakistan Movement for Justice party, said: "The impact will be that Pakistan is in more turmoil – it will be the start of civil war in Pakistan."
Ms Bhutto had returned to Pakistan from exile in October. She survived an assassination attempt on the day of her arrival and was campaigning ahead of next month's elections when she was killed along with at least 20 others.
Pakistani opposition leader Nawaz Sharif yesterday said his party would boycott the 8 January poll and demanded that the president, Pervez Musharraf resign immediately.
He added: "Musharraf is the cause of all the problems."
The United States, which sees Pakistan as a key ally in its battle against al-Qaeda, had championed Ms Bhutto as a popular leader who might help to return the country to a civilian-led democracy after nearly a decade of military rule.
George Bush, the president, said: "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."
Gordon Brown, the Prime Minister, said Ms Bhutto "risked everything in her attempt to win democracy in Pakistan and she has been assassinated by cowards who are afraid of democracy".
He added: "The terrorists must not be allowed to kill democracy in Pakistan, and this atrocity strengthens our resolve that the terrorists will not win there, here, or anywhere in the world."
Pakistan put its paramilitary forces on red alert across the country in the wake of the assassination.
The unrest was fiercest in Ms Bhutto's native Sindh province and its capital, Karachi. Tyres were set on fire on many roads, and stone-throwing and shooting were reported in many places. Most shops and markets shut down.
At least 20 vehicles were set alight in the central Sindh town of Hyderabad.
There were also small protests in Rawalpindi and the nearby capital, Islamabad.
Protesters blocked roads with burning tyres and chanted slogans against Mr Musharraf in Muzaffarabad, the capital of Pakistani Kashmir in the mountainous north.
MJ Gohel, executive director of the Asia-Pacific Foundation, said: "The ramifications are enormous. There will be more violence and if Musharraf imposes another state of emergency, there could be further crackdowns and protests.
"We are looking at a political vacuum if the elections don't take place. The radical Islamists could start occupying that vacuum and operating from within it.
"Pakistan is home to al-Qaeda and the Taleban and is also home to nuclear weapons and long-range missiles… all of which have repercussions for the West and the world."
Farzana Shaikh, an expert on Pakistan and an associate fellow at the Chatham House analysis group in London, said: "The electoral process has been stopped in its tracks.
"There is a very real possibility Musharraf will decide the situation has got out of control and that he needs to impose emergency rule again."
She said Pakistan was entering "uncharted waters", which could lead to instability in a region that has seen three wars fought between Pakistan and its nuclear-armed neighbour, India.
Ms Shaikh added: "This is not the first crisis Pakistan has faced since its inception in 1947, but I would say it is the worst convergence of crises we have seen."
Nicolas Sarkozy, the president of France, called the killing odious. He added: "France, like the European Union, is particularly attached to stability and democracy in Pakistan."
The UN secretary-general, Ban Ki-moon, called the assassination an "assault on stability", while the Security Council went into consultations to discuss the killing.
Death must not derail the democratic process
THE assassination of Benazir Bhutto is a tragedy for her country and for all those who hope for greater democracy, peace and stability in the wider region of south and south-west Asia.
Any development which threatens the stability of Pakistan is critical to the security of the region, and international peace and security, for at least three reasons.
First, Pakistan is a nuclear weapons' state. The prospect of jihadi extremists seizing control of its nuclear facilities is a nightmare scenario. They might well attempt to reignite conflict with India and could try to use blackmail or pass expertise and nuclear materials to al-Qaeda.
Second, closer international co-operation with Pakistan is crucial if the Taleban and its al-Qaeda allies are to be prevented from undermining the democratically elected government of Afghanistan.
According to intelligence, the Taleban is able to move substantial amounts of weaponry and equipment, as well as recruits, across the border from Pakistan. If the extremists undermine the government in Pakistan, they would be able to provide far greater support for the Taleban, enabling them to wage a kind of proxy war against the international forces supporting Hamid Karzai, the Afghan president.
Last, if extremists succeed in undermining the Pakistan government, this would give a huge boost for al-Qaeda's global jihad.
All these concerns should concentrate the minds of UN Security Council members on seeking urgent measures to help the authorities in Pakistan to maintain internal security and hold genuinely free and successful elections.
We should also work to encourage those who favour democratisation in Pakistan to continue their efforts, despite all the dangers. Benazir Bhutto's brave efforts to spread democracy and moderation should inspire others to follow her example.
• Paul Wilkinson is Emeritus Professor of International Relations at the University of St Andrews
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