The decision was taken within hours of Premier Yousuf Raza Gilani agreeing to Prime Minister Manmohan Singh's demand to fly the ISI chief to Delhi.
At a meeting in Islamabad early today, President Asif Ali Zardari, Gilani and Army chief General Ashfaq Parvez Kayani decided against sending Lieutenant General Pasha to India which suspected involvement of Pakistani elements in the Mumbai terror attacks that left over 160 dead.
The unscheduled meeting held at the presidency continued well past 1.30 am.
"A representative of the ISI will visit India, instead of its Director General Lieutenant General Shuja Pasha, to help in investigating the Mumbai terrorism incident," a spokesman for the prime minister's house said.
Gilani had Friday agreed to send the ISI chief to New Delhi for sharing information on the coordinated terror attacks on Mumbai when he spoke to Dr Singh over the phone.
The Pakistan prime minister had telephoned Dr Singh to condemn the attacks and offer Islamabad's assistance in investigating the incident.
Dr Singh wanted the ISI chief to visit Delhi to put before him information about the possible involvement of Pakistani elements, including those belonging to the Lashkar-e Tayiba in the terror strikes.
Separate statements issued by the prime minister's house and the foreign office had earlier said the ISI chief would travel to India in connection with the probe.
The statement from the prime mMinister's house had said the 'ISI chief will visit India at the earliest' after modalities were worked out by both governments.
Gilani's decision was criticised by the Opposition Pakistan Muslim League-Nawaz, PML-Q and Jamaat-e-Islami. Analysts in India and Pakistan had also questioned whether the civilian government led by Gilani's Pakistan People's Party would be able to convince the powerful military to send the ISI chief to India.
Talking to a television channel last night, Pakistani army spokesman Major General Athar Abbas had been guarded when asked about the ISI chief's proposed visit to India.
"As far as the visit is concerned, I can only comment when we receive a formal order from the government on the modalities and the details of the visit," he said.
Major General Abbas also said it was "unfortunate" that senior Indian military officers were "making speculative comments without even making a preliminary investigation" into the Mumbai attacks.
External Affairs Minister Pranab Mukherjee said in Jodhpur on Friday that "some elements" based in Pakistan were responsible for the terror strikes in Mumbai.
Mukherjee noted that Pakistan had assured India it would not allow territories under its control to be used for terrorism against India.
Dr Singh, indicating the involvement of Pakistani elements in the Mumbai strikes, said on Thursday that India would not tolerate use of territories of its neighbours for launch of attacks against it and that 'there would be a cost if suitable measures are not taken by them.'