Pakistan has said that an Indian on death row for spying would need to be forgiven by the relatives of those who died in the bombings he carried out.
Foreign Minister Khurshid Kasuri said under Islamic law the sentence on Manjit Singh could then be commuted.
Singh's family says he is a farmer called Sarabjit and has suffered a case of mistaken identity.
However, Pakistan's Supreme Court on Tuesday again backed the sentence and ruled it was "well deserved".
High-profile campaign
Manjit Singh was sentenced for carrying out a series of bomb blasts in 1990. Islamabad says he was working for Indian intelligence.
Last month, Pakistan's Supreme Court upheld the death sentence.
On Tuesday, it again ruled in favour of the sentence and said Singh did not merit any leniency.
It observed he was convicted on only one count whereas he should have been convicted separately for every death caused.
Singh's family have fought a high-profile campaign for his release, threatening suicide if the sentence is carried out.
The Indian government has also asked Pakistan for mercy.
Indian diplomats met Singh last month in prison in Lahore, where he is being held pending a final decision on his case.
President Musharraf has described the case as a "serious issue".
"The man has carried out terrorist attacks and killed people here. Now should I have sympathy towards him?" he said in an interview last month.
The president has the power for a final ruling in the case.
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