"It is reported that Shujaat Hussain has gone back to the mosque with some sort of an offer for safe passage, one of the cleric's demands," Kamal Hyder said.
"There is again some light at the end of the tunnel when people had assumed that this crisis was going to end with the military storming that place."
'No flexibility'
Earlier, after four hours of trying to get the students inside the mosque to send out the dead and wounded, there had seemed little prospect for a peaceful resolution.
"I can't say that there's been any breakthrough," Mohammad Ali Durrani, information minister, said. "So far, there's no flexibility."
Ijaz ul-Haq, the religious affairs minister, had told the AFP news agency that Abdul Rashid Ghazi, the mosque's deputy leader, had refused to leave the mosque.
"Ghazi will not come out and and we do not want to go inside," Haq said. "He knows what is at stake. This is a last-ditch effort."
The government later sent a mobile phone for Ghazi so they could continue to communicate with him.
Ghazi had said he was unable to recharge his phone because the government has cut electricity to the mosque, along with water and gas.
A mosque official said Ghazi wanted a delegation of clerics or a "mutually agreed emissary" to come inside. "Ghazi does not want to come out because he does not trust the government," the official said.
The government had decided to give negotiations a chance after Pervez Musharraf, Pakistan's president, and Shaukat Aziz, the current prime minister, held crisis meetings with senior officials to weigh options on how to end the standoff.
House arrest
Aziz said earlier on Monday that the government would allow Ghazi to be held under house arrest with his mother if he surrendered and freed the women and children inside the Red Mosque.
"We are trying to avoid loss of life and using all negotiating options to end this crisis, including house arrest for Ghazi and his old mother," he told reporters.
Security forces have held back from mounting a full-scale assault because of fears for the safety of women and children that they say are being held hostage by Ghazi.
Troops have instead blasted holes in the walls of the mosque and madrassa compound to provide them with escape routes.
Ghazi says he has nearly 2,000 followers with him and that none of them are being held hostage.
Students affiliated to the mosque have troubled the government with an anti-vice campaign since January, which has involved the abduction of several people they linked to prostitution, including seven Chinese.