Attorney General Malik Mohammed Qayyum told The Associated Press that the country's "state of emergency will end within one month." He provided no further details and would not say when a formal announcement might come.
A week ago, Musharraf declared the state of emergency and suspended the constitution, citing gains by extremists in Pakistan's frontier region and saying political unrest was undermining the fight against militants.
On Friday, police threw up barbed wire around Bhutto's house to keep her from speaking at a rally to protest Musharraf's imposition of emergency rule, and security forces rounded up thousands of her supporters to block any mass demonstrations.
The action was a new blow to hopes the two U.S.-friendly leaders could form an alliance against militants - a rising threat underlined by a suicide bombing in northwest Pakistan that targeted the home of a Cabinet minister, who escaped without injury.
Bhutto twice tried to evade authorities in her car, telling police who surrounded her villa: "Do not raise hands on women. You are Muslims. This is un-Islamic." Officers blocked the former prime minister's way with an armored vehicle.
After being turned back the second time, she got out of the car and joined her supporters, who chanted, "Go, Musharraf, go!"
"I want to tell you to have courage because this battle is against dictatorship and it will be won by the people," Bhutto said as police stood guard nearby.
But on Saturday, officials said she could leave her home.
"She is now free to go anywhere," said Naeem Iqbal, the police chief for the upscale sector of the capital, Islamabad, where Bhutto lives.
Later Saturday, Bhutto left her home. Her destination wasn't immediately known, but a spokeswoman earlier said she would meet with foreign diplomats and party colleagues.
In Rawalpindi, the nearby garrison town where she had hoped to stage the rally, police fired tear gas at hundreds of Bhutto loyalists who staged wildcat protests and hurled stones. More than 100 were arrested.
Plainclothes teams of police darted to grab those on wanted lists and shove them into paddy wagons, reports CBS News correspondent Sheila MacVicar. Young, old, parliamentarians, party officials, men, women - anyone who dared to take a political stand today against Pakistan's military leader was dragged away.
"It's a nation's historical moment," said Naheed Shazhad, a candidate for parliament. "It's to change history in our country."
That statement to the cameras was enough to have the police descend upon her.
Police reportedly rounded up 5,000 of her supporters.
The Bush administration called for the restrictions on Bhutto to be lifted, as Pentagon leaders voiced concern that the political turmoil will undercut the Pakistani army's fight against insurgents along the Afghanistan border. Pakistan's government said late Friday that she was again free to move about.
The U.S. was relying on a marriage of convenience blossoming between Bhutto and Musharraf to help ease the transition to democracy, MacVicar said. The honeymoon hadn't even begun, and she accused him of betrayal when he put her under detention.
Deputy Information Minister Tariq Azim said that the restraining order against Bhutto told her to stay at her Islamabad home and not proceed to Rawalpindi because of the security threat. The city mayor said they had reports suicide bombers might attack the rally.
Kamal Shah, a top Interior Ministry official, said a district magistrate had served a "detention order" on Bhutto so she could not leave her home. Rehman, however, said no arrest papers had been served on Bhutto.
The British Broadcasting Corp. reported that officials did try to serve arrest papers to Bhutto, but she refused to take them and went back inside. According to the BBC report, the detention order is valid for 30 days.
Speaking by phone from the scene, Bhutto said that no arrest papers had been served on her.
"If I'm arrested the People's Party of Pakistan workers will continue to fight for democracy and the rule of law," she told reporters who heard the call via speakerphone.
Early Saturday, about 20 police - far fewer that the day before - loitered at the end of the street leading to her home, pulling metal barriers aside to let other residents pass.
Meanwhile, a bomb explosion at the home of a government minister in the northwestern city of Peshawar killed at least four people, police said.
The attack happened at the residence of the minister for political affairs, Amir Muqam, and also wounded three people, said Aslam Khan, a local police official.
Muqam said he saw two or three dead in the blast - members of his security staff. Police said the bombing was a suicide attack.
U.S. Says Musharraf's Actions Won't Immediately Jeopardize Aid
Despite the calls for a return to democratic order in Pakistan, the Bush administration has concluded it is not legally required to cut or suspend the hundreds of millions of dollars in aid currently going to Pakistan, despite President Musharraf's imposition of a state of emergency and a crackdown on the opposition and independent media.
U.S. assistance to its key anti-terrorism (and nuclear armed) ally, which has totaled nearly $10 billion since 2001, is governed by numerous legislative requirements that could trigger automatic aid cutoffs, but all are covered by locked-in presidential waivers, according to officials.
Those waivers exempt Pakistan from aid restrictions, and do not need to be renewed until Congress approves the pending budget for the current fiscal year. That budget requests $845 million for Pakistan.
"No one at this point believes there is anything automatic that has to kick in," said one senior official. "The waivers are valid until Congress gets around to passing the fiscal '08 budget."
The initial findings do not mean that aid to Pakistan will never be cut, only that there is currently no statutory reason to do so.
Meanwhile, Defense Secretary Robert Gates voiced concern that the political turmoil there will undermine the Pakistani army's fight against terrorism.
"The concern I have is that the longer the internal problems continue, the more distracted the Pakistani army and security services will be in terms of the internal situation rather than focusing on the terrorist threat in the frontier area," he told reporters earlier Friday on his plane en route home from a weeklong visit to Asia.
To date, the Pentagon has said the unrest has had no effect on U.S. military operations. But Gates' comments underscored the administration's nervousness, even as it voices support for Musharraf as an ally in the war on terror.