The men on a motorcycle killed Chaudhry Zulfikar as he left his home and headed to a hearing in the case.
Chaudhry Zulfikar was at the helm of a number of highly controversial cases, including the 2007 Bhutto assassination in which Musharraf is accused of involvement.
Killed: Gunmen have shot dead Chaudhry Zulfiqar
Ali the prosecutor investigating the murder of Pakistan's ex-leader
Benazir Bhutto
Zulfikar was on his way to a court in Islamabad when gunmen fired at him from a taxi, hitting him in the head, shoulder and chest, said police officer Mohammed Ishaq.
Zulfikar then lost control of his car, which hit a woman passer-by and killed her, said another police officer, Mohammed Rafiq.
Zulfikar's guard, Farman Ali, returned fire and is believed to have wounded at least one of the attackers, Rafiq said. Ali also was injured in the attack.
Police official Yasin Farooq said the attackers fled after killing Zulfikar, and that a massive search has been launched to find them.
Attack: Security officials inspect the damaged
car, which prosecutor Chaudhry Zulfikar was travelling in, when he came
under attack by unidentified gunmen
Murder: Zulfikar, the prosecutor investigating
the 2007 assassination of former Pakistani Prime Minister Benazir
Bhutto, one of the most shocking events in Pakistan's turbulent history,
was shot dead on Friday
A motive for the killing was unclear,
but Zulfikar's involvement in the two particularly high-profile cases
will likely be scrutinized closely.
Government prosecutors have accused Musharraf of being involved in the Bhutto assassination and not providing enough security to Pakistan's first female prime minister. Musharraf, who was in power when was killed, has denied the allegations. At the time of the attack, he blamed the assassination on the Pakistani Taliban.
The Bhutto case has lingered for years in the Pakistani court system. A number of alleged assailants are on trial but no one has been convicted. The case burst into the headlines when Musharraf returned in March after four years in exile.
Zulfikar was also the government's lead prosecutor in a case related to the 2008 terrorist attack on the Indian city of Mumbai that killed 166 people.
Government prosecutors have accused Musharraf of being involved in the Bhutto assassination and not providing enough security to Pakistan's first female prime minister. Musharraf, who was in power when was killed, has denied the allegations. At the time of the attack, he blamed the assassination on the Pakistani Taliban.
The Bhutto case has lingered for years in the Pakistani court system. A number of alleged assailants are on trial but no one has been convicted. The case burst into the headlines when Musharraf returned in March after four years in exile.
Zulfikar was also the government's lead prosecutor in a case related to the 2008 terrorist attack on the Indian city of Mumbai that killed 166 people.
Investigation: Pakistani security officials inspect the vehicle of Chaudhry Zulfiqar this morning
Devastated: Qamar Abbas (seconf left) the son of slain government prosecutor Chaudhry Zulfiqar looks at the bullet-riddled car
Pakistan has put seven men on trial on charges they assisted in the Mumbai siege, but the trial has made little progress. India has criticized Pakistan for not doing more to crack down on the militants blamed for the attack. Hafiz Saeed, the head of a group believed to be a front for Lashkar-e-Taiba, remains free, and many believe he enjoys the protection of the government.
Lashkar-e-Taiba was founded years ago with the help of Pakistani intelligence to put pressure on India over the disputed territory of Kashmir.
Musharraf returned to Pakistan to make a political comeback despite Taliban death threats and a raft of legal cases against him. But his fortunes have gone from bad to worse since he arrived.
Judges barred him from running in the May 11 parliamentary election not long after he arrived because of his actions while in power.
A court in the northwestern city of Peshawar went further this week and banned Musharraf from running for public office for the rest of his life - a ruling the former military strongman plans to appeal.
Musharraf is currently under house arrest on the outskirts of Islamabad in connection with several cases against him, including the Bhutto case. He also faces allegations of treason before the Supreme Court.
Zulfikar was headed to a hearing related to Musharraf and the Bhutto case at a court in Rawalpindi, next to Islamabad, when he was killed, said Ishaq, the police officer.
Musharraf seized power in a military coup in 1999 when he was serving as army chief and ruled for nearly a decade until he was forced to step down in 2008 because of growing discontent with his rule.
Though Pakistan has experienced repeated violence, it's rare for such an attack to happen in the capital, which is home to high-ranking government and military officials, diplomats and international aid workers.
Friday's killing comes at a sensitive time for Pakistan, which is preparing for nationwide elections on May 11.
The vote will mark the first time that an elected civilian government has fulfilled its term and handed off power to another civilian government in the country.
Pakistan has experienced three coups, including the one led by Musharraf in 1999.
President Asif Ali Zardari strongly condemned the prosecutor's killing and called for a thorough investigation.
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