"The surgeons confirmed that she has been martyred," Bhutto's lawyer Babar Awan said.
A party security adviser said Bhutto was shot in neck and chest as she got into her vehicle to leave the rally in Rawalpindi near the capital Islamabad. A gunman then blew himself up.
"At 6:16 p.m. she expired," said Wasif Ali Khan, a member of Bhutto's party who was at Rawalpindi General Hospital where she was taken after the attack.
Her supporters at the hospital began chanting "Dog, Musharraf, dog," referring to Pakistan's president Pervez Musharraf.
Some smashed the glass door at the main entrance of the emergency unit, others burst into tears. One man with a flag of Bhutto's Pakistan People's Party tied around his head was beating his chest.
In Washington, the State Department said it was seeking confirmation of Bhutto's condition.
"Certainly, we condemn the attack on this rally," deputy spokesman Tom Casey said. "It demonstrates that there are still those in Pakistan who want to subvert reconciliation and efforts to advance democracy."
The United States has for months been encouraging Musharraf to reach an accommodation with the opposition, particularly Bhutto, who was seen as having a wide base of support in Pakistan. Her party had been widely expected to do well in parliamentary elections set for next month.
At least 20 others were killed in the blast that took place as Bhutto left the rally where she addressed thousands of supporters in her campaign for Jan. 8 parliamentary elections.
Bhutto served twice as Pakistan's prime minister between 1988 and 1996. She had returned to Pakistan from an eight-year exile Oct. 18.
On the same day, her homecoming parade in Karachi was also targeted by a suicide attacker, killing more than 140 people. On that occasion she narrowly escaped injury.
© 2007 Associated Press