"We will certainly look into the request by the Indian government," she told Karan Thapar on his programme "India Tonight" telecast on CNN-IBN.
Bhutto was asked whether she would grant the extradition of Dawood if she is elected to power.
"If he is living in Karachi, it is very wrong ... I do not want Pakistan should get a bad name and be seen as a country that harbours criminals from all parts of the world, including India," she said.
Bhutto, who has been living in self-imposed exile in London, said that the militants Pakistan "nurtured" during the Afghan war against the Soviet Union had returned to haunt them.
"Groups like Jaish-e-Mohammad and Lashkar-e-Tayyaba have unleashed suicide bombings in Pakistan," she said adding that it was time "Pakistan put its internal house into order".
Backing the composite dialogue between India and Pakistan, Bhutto said the process "is setting a new pace, setting a new agenda and a new goal."
The two-time premier said Kashmir was a core issue between the two countries but not the one that should be allowed to derail the Indo-Pak relationship or the dialogue.
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