State media and her party confirmed her death.

"She has been martyred," said party official Rehman Malik.

Bhutto, 54, died in hospital in Rawalpindi. Ary-One Television said she had been shot in the head.

Police said a suicide bomber fired shots at Bhutto as she was leaving the rally venue in a park before blowing himself up.

"The man first fired at Bhutto's vehicle. She ducked and then he blew himself up," said police officer Mohammad Shahid.

Police said 16 people had been killed in the blast, which occurred during campaigning for a January 8 national election. It is unclear if the poll will now go ahead.

"It is the act of those who want to disintegrate Pakistan because she was a symbol of unity. They have finished the Bhutto family. They are enemies of Pakistan," senior Bhutto party official Farzana Raja told Reuters.

Bhutto's father, Zulfikar Ali Bhutto, was Pakistan's first popularly elected prime minister. He was executed in 1979 after being deposed in a military coup.

A Reuters witness at the scene of the attack said he had heard two shots moments before the blast. Another Reuters witness saw bodies and a mutilated human head strewn on a road outside the park where she held her rally.

NO WORD FROM MUSHARRAF

A spokesman for President Pervez Musharraf said he had to confirm the news before commenting.

U.S. President George W. Bush was informed of Bhutto's death at his Texas ranch, where he was spending the year-end holiday.

Bush had no immediate reaction. A U.S. State Department official said: "The attack shows that there are still those in Pakistan trying to undermine reconciliation and democratic development in Pakistan."

In France, Foreign Minister Bernard Kouchner issued a statement firmly condemning what he called "this odious act".

"He pays homage to the memory of Ms Bhutto, an eminent figure in Pakistani political life," the ministry statement said.

"He reaffirms our country's commitment to Pakistan's stability and its democracy, which must be at the centre of attention of the entire international community."

A suicide bomber killed nearly 150 people in an attack on Bhutto on Oct. 19 as she paraded through the southern city of Karachi on her return from eight years in self-imposed exile.

Islamist militants were blamed for that attack but Bhutto had said she was prepared to face the danger to help the country.

In her speech on Thursday, Bhutto spoke of the risks she faced.

"I put my life in danger and came here because I feel this country is in danger. People are worried. We will bring the country out of this crisis," Bhutto told the rally.

TEARS, SHOTS

People cried and hugged each other outside the hospital where she died. Some shouted anti-Musharraf slogans.

Another former prime minister and opposition leader, Nawaz Sharif, spoke to the crowd.

"My heart is bleeding and I'm as grieved as you are," Sharif said.

Residents of Karachi, Bhutto's home town, said they had heard gun shots after news of her death spread, apparently from her enraged supporters.

On international financial markets, gold and government bonds rose while U.S. stock futures fell on Thursday after news of Bhutto's assassination.

Analysts say the shock of the Bhutto news triggered a classic capital flight to assets which are considered as safe havens in times of geopolitical stress.

Bhutto became the first female prime minister in the Muslim world when she was elected in 1988 at the age of 35. She was deposed in 1990, re-elected in 1993, and ousted again in 1996 amid charges of corruption and mismanagement.

She said the charges were politically motivated but in 1999 chose to stay in exile rather than face them.

Bhutto's family is no stranger to violence.

Both of her brothers died in mysterious circumstances and she had said al Qaeda assassins tried to kill her several times in the 1990s.