'Drawn-out case'
Observers believe it is still possible Musharraf would be allowed to go back into exile in a face-saving solution.
Imtiaz Gul, an independent security analyst, said the indictment might be profoundly symbolic but there was still little chance of Musharraf actually being convicted.
"Legally, it means it will be a long, drawn-out case because it will be very difficult if not impossible to prove the direct involvement of Musharraf," Gul said.
Gul said the army - which would not comment on Tuesday's indictment - had tried to warn Musharraf about the legal dangers he faced before he decided to return from exile this year to contest a May election.
Nevertheless, there would be many former colleagues angry to see their old boss dragged through the courts.
Bhutto was killed weeks after she returned to Pakistan from years in self-imposed exile.
Her assassination set off a wave of protests across the country and helped propel her Pakistan People's Party to office and her husband, Asif Ali Zardari, to the presidency.
A UN commission of inquiry said in a 2010 report Pakistan failed to properly protect Bhutto or investigate how she died. At the time, the government blamed Pakistani Taliban militants. Musharraf has said he warned her of the danger she faced.
Musharraf himself came back to Pakistan this year hoping to contest the election after nearly four years of self-imposed exile. Instead, he was disqualified and became enmeshed in a thicket of legal cases going back to his near 10-year rule.
Reuters-AP