Media reports had earlier said that the PPP-led government had given an extension to Lt Gen Pasha, a close aide of Pakistan Army chief Gen Ashfaq Parvez Kayani, after a previous one-year extension ended on March 18.
However, no official notification regarding the extension was made public and the duration of the extension was not revealed by officials.
During an appearance on "PM Online," a monthly show on state-run PTV that allows viewers to interact with the Prime Minister, Gilani said the government had decided to retain Pasha as the ISI chief for another year because of the prevailing security situation in the country.
"We need continuity in the current situation and the extension was very necessary," Gilani said.
He described Pasha as "an intelligent person."
This was the first time a senior government functionary had spoken about the duration of the extension given to the ISI chief following intense speculation about his new tenure.
Some media reports had said the military establishment wanted Pasha to be given a two-year extension so that he could remain in office until a three-year extension given to Kayani ends in 2013.
When pressed by an interviewer on the TV show last night about why the government could not pick a successor to Pasha from within the army, Gilani said: "Why is there confusion over the extension for the ISI chief? It is very much the right of the government and we have given him one year's extension in the same position."