Bhutto was the keynote speaker at the India Today Conclave in New Delhi, the Press Trust of India reported.
"On the 60th year of independence of both the countries, I propose that we put end to the destructive chapter of the lives of the two countries," she said.
Bhutto said India and Pakistan should have the same kind of relationship India has with China, where the two countries have frequent disputes without going to war.
This week, Bhutto and another exiled former prime minister, Nawaz Sharif, agreed to a political alliance. During a meeting in London, the two talked about plans to oust President Pervez Musharraf, The Telegraph reported.
Bhutto heads the Pakistan Peoples' Party and Sharif the Pakistan Muslim League. They are expected to hold a joint demonstration Monday against Musharraf's suspension of the chief justice.
"This has become a very explosive situation for Musharraf," said Wajid Shams-ul-Hasan, a former high commissioner for Pakistan. "He should go and the army should go back to barracks."