Judge Rana Nisar Ahmed of the Rawalpindi-based court declared Musharraf, currently living in self-exile outside Pakistan, a fugitive on the request of the Federal Investigation Agency.
Prosecutors told the judge during proceedings held in Adiala Jail for security reasons that they had been unable to serve an arrest warrant issued by the court for Musharraf.
The authorities in Britain, where Musharraf has been living since 2009, had not provided help in serving the warrant as that country has no extradition treaty with Pakistan, the prosecutors told the judge.
The prosecutors then asked the judge to declare Musharraf a "proclaimed offender".
Advertisements about the declaration will be published in newspapers, the judge said. Authorities could also impound Musharraf`s movable and immovable property, reports said.
The trial of five suspects, including a would-be suicide bomber, suspected of involvement in Bhutto`s killing has been held up for several months due to Musharraf`s refusal to cooperate with investigators.
The prosecutors today provided information to the judge, including an interview given by Musharraf, which showed he was aware of the trial underway in Pakistan.
The anti-terrorism court issued an arrest warrant for Musharraf in February after investigators declared him an "absconder" and told the judge that the former military ruler was not cooperating in the probe into the assassination.
Investigators have alleged that Musharraf`s regime had failed to provide adequate security to Bhutto after she returned to Pakistan from self-exile in 2007.
Bhutto was killed by a suicide bomber after she had addressed an election rally in Rawalpindi in December that year.