The Pakistan government blamed Islamist militants for twin blasts early on Friday that killed 133 people as opposition leader Benazir Bhutto drove through masses of supporters in Karachi.
Bhutto, traveling in a truck reinforced to withstand bomb attacks, was unhurt by the deadliest bomb attack in her country's history.
The attack underscored the turbulence which lay in store for Pakistan ahead of an election due by January, but it was unclear how the assassination attempt might affect a possible power-sharing deal between Bhutto and President Pervez Musharraf.
Bhutto planned to hold a news conference later on Friday.
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.
There was no claim of responsibility. But 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, adding it was too early to say which group was involved.
Interior Ministry Secretary Syed Kamal Shah said 133 people had been killed and 290 wounded, in what was the second most deadly suicide bombing of 2007, and most deadly outside a war-zone.
"The first blast was caused by a hand grenade. The second was the suicide attack," Manzoor Mughal, a senior police official involved in the investigation, told Reuters.
"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.
Militants linked to al Qaeda, angered by Bhutto's support for the U.S. war on terrorism, had this week threatened to assassinate her, and officials said there were intelligence reports of plots by three separate groups.
Bhutto's husband, Asif Ali Zardari, accused Pakistani intelligence agencies of involvement in the attack on his wife, and there are many Pakistanis who shared his suspicions.
Bhutto, 54, has plenty of enemies in Pakistan with links to the country's security apparatus and jihadi groups, going back to her two stints in power more than a decade ago.
Musharraf had given some support for Bhutto's return and the two might end up sharing power after the general election.
The United States 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.
Musharraf said in a statement the attack was "a conspiracy against democracy".
The United States, other allies and neighbor India condemned the attack.
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.
Most shops in Karachi stayed shut on Friday, schools were closed, there were no buses and few taxis, and many people stayed at home following the carnage overnight.
Idolized by impoverished villagers, Bhutto's re-entry to the political scene was also 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 just short of life highs at 14,756.73 points by midday (3:00 a.m. EDT).
The attack took place shortly after midnight, more than 10 hours after Bhutto had arrived from Dubai.
About 20,000 security personnel had been deployed to protect Bhutto and the provincial governor said authorities had urged her party to wind up the procession faster because of "real threats".
The number of suicide and roadside bomb attacks have multiplied since troops stormed Islamabad's Red Mosque to crush an armed student movement in July. Two bomb blasts struck the northwestern cities of Peshawar and Dera Ismail Khan on Friday, wounding two people.
At the same time Pakistani forces have suffered heavy casualties struggling for control of the Waziristan tribal region bordering Afghanistan.
(Additional reporting by Asim Tanveer, Zeeshan Haider, Matiullah Jan, Kamran Haider)