The decision to give negotiations a chance came 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 on Monday that the government would allow Abdul Rashid Ghazi, the mosque's deputy leader, to be held under house arrest with his mother if he surrenders and frees 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.
Kamal Hyder, Al Jazeera's correspondent in Islamabad said: "Musharraf met with his highest security chiefs, at a time when there is now growing opposition to the standoff, and people are saying that it should be ended peaefully.