Mourners at the funeral in Garhi Khuda Bakhsh
Mourners converged on the family mausoleum where she was buried next to her father Zulfikar Ali Bhutto near their home village in Sindh province.
The coffin, draped in the flag of Ms Bhutto's party, was driven in a white ambulance through the dense crowds.
Pakistan's interior ministry has said it has evidence al-Qaeda and the Taleban were behind the assassination.
Officials were speaking after a reported claim of responsibility by al-Qaeda in Afghanistan.
Ms Bhutto, a former Pakistani prime minister, was shot at an election rally in Rawalpindi on Thursday by a gunman who then blew himself up.
Pakistani security forces are on high alert, with at least 19 people killed in protests by Bhutto supporters across the country since the assassination.
Slogans and tears
Ms Bhutto's plain wooden coffin was taken from the family home to the burial site 7km (four miles) away at the village of Garhi Khuda Bakhsh.
Amid weeping and beating of heads and chests, mourners jostled to see the coffin, which was accompanied by Ms Bhutto's husband Asif Ali Zardari and her three children.
Her father, also a former national leader, was hanged in 1979 by an earlier Pakistani military government.
Outside the triple-domed mausoleum, crowds chanted slogans blaming President Pervez Musharraf for Ms Bhutto's death.
The BBC's Owen Bennett-Jones, who is in the district of Larkana, says the mood among local people is one of anger and confusion.
Rioting and unrest has been reported across the country.
- At least one passenger train was set ablaze in Sindh Province and a number of railway stations were reportedly burnt as security forces in the province were ordered to shoot rioters on sight
- Several people died in Karachi as government offices, police stations and vehicles were torched by rioters and police opened fire on protesters in Hyderabad
- The office of a pro-government party was ransacked and set ablaze in Peshawar
- In the city of Multan in Punjab province, a mob ransacked seven banks and torched a petrol station
Other cities across Pakistan are at a virtual standstill.
Schools, businesses and transport are all closed, and people are reluctant to step out during the three days of national mourning declared by Mr Musharraf.
Musharraf under pressure
Plans for a general election on 8 January, for which Ms Bhutto had been campaigning when she was killed, remain unchanged, the government says.
The election is meant to pave the way for a return to democratic rule, suspended in October 1999 when the then Gen Musharraf seized power through a coup.
Mohammedmian Soomro, the caretaker prime minister, said the government would consult other political parties on the election issue.
Ms Bhutto's political rival Nawaz Sharif, who was deposed as prime minister in the coup, has announced his party will now boycott the election, saying free elections were impossible under Mr Musharraf.
Another opposition politician, the former cricketer Imran Khan, joined Mr Sharif's call for Mr Musharraf's resignation, blaming the president for failing to provide adequate security for Ms Bhutto.
With all the opposition parties now against the election, it is hard to see how they will be a true test of the democratic process, the BBC's Karishma Vaswani reports.
Ms Bhutto, 54, was leaving the election rally in Rawalpindi, standing in the open sunroof of a car, when the gunman shot her in the neck and chest.
Seconds later, the attacker blew himself up, killing at least 20 other people.
Ms Bhutto returned from eight years of self-imposed exile in October, following an amnesty agreed with President Musharraf.
Shortly after her return, she survived a double bomb attack on her convoy in Karachi which killed more than 130 people.
She accused rogue elements of the intelligence services of involvement in the attack.
The al-Qaeda commander in Afghanistan, Mustafa Abu al-Yazid, claimed responsibility for her assassination, according to the Asia Times newspaper.Javed Cheema, spokesman for the Pakistani interior ministry, told AFP news agency Ms Bhutto had been on the militant Islamist network's "hit list".