Police said three grenades exploded inside the church
A Pakistani and an Afghan were also killed. The fifth victim has not been identified. More than 40 people were injured, including 10 Americans.
Pakistan's President Pervez Musharraf also condemned the attack, saying his government remained undeterred in its fight against terrorism in all its forms.
People from eight different countries were among those injured. They are reported to include Sri Lanka's ambassador to Pakistan, his wife and child.
Up to 70 people had been in the Protestant International Church in the high security diplomatic quarter of the city when the attack took place.
Bombers escape
Police say at least two men burst in and tossed six grenades at the congregation before escaping.
Three grenades exploded but the others failed to detonate.
American Cindy Jess said: "I saw two men come into the back of the church and throw what looked like hand grenades.
Elisabeth Mundhenk, 54, of Hamburg, Germany, said she hid under a piano when the first explosion rocked the church, but still suffered shrapnel wounds.
"There was blood, blood, blood," she said while awaiting treatment. "It was horrific. There was a horrible smell and we could barely breathe."
Son injured
Nick Parham, a Briton who works for the Tearfund aid agency, said: "One chap came down the aisle a couple of feet away from me. He had a belt on with a whole load of what looked like British army smoke grenades or home-made grenades.
"He had one in his hand. At that point I hit the deck. There were five or six explosions."
The US Embassy identified the dead Americans as Barbara Green and her daughter Kristen Wormsley, a student at the American School in Islamabad.
Mrs Green and her husband, Milton, both worked at the embassy - she in administration and he in the computer division.
A son, whose name has not been released, was slightly injured.
The BBC's Zaffar Abbas, in Islamabad, says the incident has posed a major challenge for President Musharraf.
He has declared that the campaign against extremist Islamic groups will continue but he may have to do much more to convince people, both at home and abroad, that Pakistan is a safe place.
Attacks on Christians in largely Muslim Pakistan are relatively rare, although a shooting incident in October 2001 in the eastern province of Punjab left 18 dead.