Pakistani opposition leader Benazir Bhutto said she would carry on her struggle for democracy, despite an attack on her motorcade that killed 133 people as she returned home after eight years of exile.

'We are prepared to risk our lives. We're prepared to risk our liberty. But we're not prepared to surrender this great nation to militants,' Bhutto, wearing a black armband, told a news conference at the home of her parents-in-law in Karachi.

'The attack was on what I represent. The attack was on democracy and the very unity and integrity of Pakistan.'

The 54-year-old former prime minister returned on Thursday to lead her Pakistan People's Party into national elections due in January that are meant to mark a transition from military to civilian-led democracy.

Bhutto said she had known an attempt on her life was coming and she expected more. She also alluded to enemies in government who were spreading militancy and plotting against her.

'I am not accusing the government. I am accusing people, certain individuals who abuse their positions. Who abuse their powers,' she said.

Traveling in a truck reinforced to withstand bomb attacks, Bhutto was unhurt by one of the deadliest bomb attacks in her country's violent history. The Interior Ministry said 133 people had been killed and 290 wounded.

The attack underscored the turbulence which lay in store for Pakistan ahead of the elections but it was unclear how the assassination attempt might affect a possible power-sharing deal between Bhutto and President Pervez Musharraf.

Washington has quietly encouraged their alliance to keep nuclear-armed Pakistan pro-Western and committed to fighting al Qaeda and supporting Nato's efforts to stabilize Afghanistan.

Army chief General Musharraf condoled with his potential ally by telephone from Islamabad and they both 'expressed their unflinching resolve to fight the scourge of extremism and terrorism', the president's spokesman Rashid Quereshi said.

The grenade and suicide attack struck Bhutto's motorcade as it edged through hundreds of thousands of well-wishers who had stayed up late into the night to welcome the two-time prime minister back to Pakistan after years of self-imposed exile.

The attack took place shortly after midnight, around 10 hours after Bhutto arrived from Dubai.

'The first blast was caused by a hand grenade. The second was the suicide attack,' said Manzoor Mughal, a senior police official. 'The attacker ran into the crowd and blew himself up.'

Mughal said the head of the suspected bomber had been found, and it was estimated he had 15 to 20 kg of explosives strapped to his body. Typically, the upward force from a blast blows off the head an attacker.

Bhutto said there were also shots fired at her vehicle during the attack, while a man armed with a pistol and another wearing a suicide belt were arrested earlier.

There was no claim of responsibility.

Baitullah Mehsud, a well-known Pakistani Taliban commander said to have issued assassination threats against Bhutto, telephoned Reuters to deny any involvement in the attack.

The government said police were investigating whether the attack had links to tribal regions bordering Afghanistan which have become hotbeds of support for al Qaeda and the Taliban.

'Definitely, it is the work of the militants and terrorists,' Interior Ministry spokesman Javed Iqbal Cheema said.

The scale of Thursday's reception for Bhutto proved she has the mass appeal no other leader can muster despite being out of power for 10 years, and out of Pakistan for eight.

Bhutto's re-entry to the political scene was welcomed by investors who saw her as a force for democracy and stability, who would help Pakistan keep consistent economic policies.

The Karachi share index dipped about one percent in early trade in reaction to the attack, but recovered to<