"We will continue our discussions with Ghotbi but nothing is definite," ISNA quoted Kafashian as saying after the meeting.
Iran have been searching for a new football coach for months, with many top foreign names mentioned, two managers seemingly appointed before being rejected, and an ongoing saga of contradictory statements.
Javier Clemente, Spanish coach, is now definitely out of the running after he refused to live full-time in Iran, despite briefly reopening talks with Iranian officials last week.
"We will continue our discussions with Ghotbi but nothing is definite."
Iran football chief
Clemente failed to make contact with the Iranian embassy in Madrid for negotiations, and Kafashian was quoted as saying: "We are not thinking about Clemente any more."
Further confusion was generated on Friday when some reports said the football federation had already selected Ghotbi as coach, before it became clear the final choice has yet to be made.
The current coaching debacle has again brought up the longstanding controversy over government interference in football in Iran, an issue which has seen the national team suspended by Fifa in the past.
The Etemad daily said the PEO showed a "cold attitude" towards Ghotbi during their meeting, thus holding up the Iranian-American's appointment.
"It seems that the issue (of the coach) has faced some problems," Mohsen Safaei Farahani, former football federation chief, told ISNA.
"Any interference in the decision... is against the Fifa statutes.
"Fifa will be sensitive towards such interference and will definitely react... if the decisions are being ignored."
However the PEO issued a statement declining any interference in the choice of coach.
"The PEO will not interfere in the selection for the coach of the Team Melli," said Mohammad Akhundi, the state-run organisation's spokesman.
Ghotbi, born in the southern Iranian city of Shiraz, attended university in the United States and won an engineering degree from the University of California, Los Angeles.
He later worked with the US national team and football academy before assisting both Guus Hiddink and Pim Verbeek during the Dutchmen's respective tenures as coach of South Korea's national team. Ghotbi has also worked with LA Galaxy and Korean club sides.
However his return to Iran to coach top Tehran club Persepolis sparked a frenzy of interest and the team were runaway leaders of the Iranian league before being docked points on a technicality last month.
Another leading candidate for the head coaching role is Amir Ghalenouie, who was national coach for the 2007 Asian Cup but was sacked after Iran lost to South Korea in the quarter-finals.
Iran made a poor start to their 2010 World Cup qualifying campaign last month by only drawing with minnows Syria in a performance that portrayed the effects of the lack of a coach.
Iran's next qualifier is against Kuwait on March 26 in Kuwait City.