Graveyard searches went on through the night
A body discovered in the port city of Karachi was feared to have been Mr Pearl's but later turned out to be someone else.
Earlier, they said they were convinced that the journalist, who was abducted nearly two weeks ago while trying to contact militant Islamic groups, was still alive.
US media reported on Sunday evening that a body found in the city with bullet wounds had been identified as Mr Pearl.
But these reports were later denied by the Wall Street Journal, which employs Mr Pearl, and by Pakistani police.
"We have shown this body to Pearl's colleagues and they have confirmed that this is not Daniel," Tariq Jamil, Karachi police chief, told Reuters news agency.
A teenage boy who police say admitted making a hoax call has been arrested.
The Wall Street Journal has also expressed its conviction that he is still alive.
Yusuf Islam - the singer and song writer formerly known as Cat Stevens - also sent a message appealing for his release.
Cemetery searches
Squads of Pakistani police have scoured every cemetery in the city of Karachi in the hunt for Mr Pearl after US media received an e-mail saying he had been killed.
His kidnappers, a previously unknown group, the National Movement for the Restoration of Pakistani Sovereignty, had said they would kill Mr Pearl if their demands were not met by Friday.
The demands include better conditions for al-Qaeda suspects in American custody.
The kidnappers have also called for the return of any Pakistani nationals among them to face trial in Pakistan and the release of the former Taleban ambassador to Pakistan, Abdul Salam Zaeef.
Mr Pearl disappeared in Karachi while investigating Islamic militant groups in Pakistan.
E-mails from the kidnappers said he was a spy.
But the Wall Street Journal is now indicating that the kidnappers no longer believe this.
"We think they believe that Danny is a journalist - nothing more or less," managing editor Paul Steiger said.
He urged the kidnappers to release Mr Pearl and to prove he is still alive.
"They can do this by providing us with a photo of Danny holding today's newspaper," Mr Steiger said.
Interview
Mr Pearl was trying to arrange an interview with Sheikh Mubarik Ali Gilani, the head of an Islamic group, Jamaat ul-Fuqrah, when he went missing.
Mr Gilani has been under arrest for several days and has been interviewed by the FBI.
The Pakistani police have, however, given no indication that they believe Mr Gilani is involved in the kidnap.
The kidnap has further soured relations between Pakistan and India.
Pakistani ministers have said Mr Gilani has been in touch with senior members of the Indian Government - but that has been dismissed out of hand in Delhi.