Pervez Musharraf has been living in a self-imposed exile since last year in connection with multiple charges. Former Prime Minister Bhutto was assassinated in 2007 while campaigning for a third-term in power.
The court's verdict delivered on Thursday now requires the former military ruler to be arrested and brought to trial if he returns to Pakistan. The court also ordered the confiscation of his property.
Musharraf was charged in 2013 as a conspirator in Bhutto's murder. He has denied the allegations.
He became the first former army chief to face criminal charges in a country where the military is believed to call the shots on key matters even when civilian governments are in power.
Musharraf has been in self-imposed exile in Dubai since last year, when a travel ban on him was lifted.
"There will be no justice till Pervez Musharraf answers for his crimes!" Bhutto's daughter Aseefa Zardari tweeted after the verdict.
The court also convicted two senior police officers on Thursday for negligence in the assassination, sentencing them to 17 years in jail.
String of charges
Musharraf is facing several charges, including one of treason, dating back to his almost nine-year rule starting 1999, when he came to power in a bloodless coup against then Prime Minister Nawaz Sharif.
Benazir Bhutto, the first woman to lead a Muslim-majority country, was assassinated in a suicide attack in 2007, just weeks after she returned from exile to make a bid for a third term in power.
In 2010, a UN report accused Musharraf's government of failing to give Bhutto adequate protection and said her assassination could have been prevented.
Musharraf's government blamed the murder on Pakistani Taliban chief Baitullah Mehsud, who denied any involvement.
Acquittals spark backlash
The Rawalpindi-based court acquitted five accused members of the Pakistani Taliban for lack of evidence. They had been in jail for nearly 10 years.
Special Prosecutor for the Federal Investigation Agency (FIA) Khawaja Mohammad Imtiaz said he found the acquittal surprising as three of them had confessed to a role in the murder.
"We believe there was a very strong case against them," he told reporters after the verdict.
Bilawal Bhutto, who now leads his mother Benazir Bhutto's Pakistan People's Party, termed the acquittal "unacceptable."
The date of their release has not yet been made public.
ap/kms (Reuters, AFP, dpa)