"We discovered there is an underworld of people who have been manufacturing (nuclear technology)," Musharraf told The Washington Post, in an interview published on Sunday.
Although he said some Pakistanis were involved, "most of them come from Europe," he told the Washington daily.
Pakistani authorities are investigating allegations that some of its top nuclear scientists, including the creator of the country's first atomic bomb, sold nuclear secrets to Libya and Iran.
Pakistan has taken steps to stop leaks of nuclear secrets, Musharraf said in the interview.
"There are strong custodial controls in Pakistan and there is no possibility of a leakage," he said told the Post.
"Before, there was a covert programme for maybe 30 years and there was a lot of autonomy given to the organisation and individuals running the (country's nuclear programme). There was a lot of chance for leakages. Now it's no longer covert. It's overt."
In November, the International Atomic Energy Agency handed Pakistan a list of individuals suspected of transferring nuclear know-how to Iran and Libya.
Eight scientists and administrators of the Khan Research Laboratories, a uranium enrichment facility, are being questioned by Pakistani authorities.
The laboratory's founder and the father of the country's nuclear bomb, Abd al-Qadir Khan, has also been questioned.
Khan, the father of Pakistan's
nuclear bomb has been questioned
Musharraf said only individuals, and not the Pakistani government, were involved in the affair.
"These are individuals and our investigation has concluded that no government of Pakistan - and I don't have a soft spot for the governments of (former prime ministers) Benazir (Bhutto) and Nawaz (Sharif) - sanctioned or authorised anyone to proliferate," he said.
Musharraf became the country's head of state after a 1999 coup d'etat and has been a staunch US ally in its so-called "war on terror".