Though an ally of the United States, Musharraf on Friday described the invasion as a mistake and said it had complicated the "war on terror".
"It has ended up bringing more trouble to the world," Musharraf said in a television interview.
"The world is more dangerous because the Iraq war has aroused the passions of the Muslims more," he added.
"The war in Iraq has complicated the war on terror ... it has made the job more difficult."
In another interview, the Pakistani president said the Palestinian issue was greater than the removal of Saddam Hussein and that Washington had to do more to resolve the Israeli-Palestinian conflict.
"The deeper issue is all political disputes involving Muslims where Muslims are being seen on television daily being killed. Palestinians, we see every day what is happening there.
"All these are images which have created an antipathy against the United States in the Islamic world," Musharraf said.
He said even if the US succeeded in Iraq, the region's problems would not be resolved until the Israeli-Palestinian issue was dealt with.
"We are fighting terrorism in its immediate context. That's not very far-sighted," Musharraf said.