Gilani held back his advice forwarding the appointment of Khosa to the President Asif Ali Zardari after the latter had cleared it late last week.
An official of the Prime Minister`s House said Khosa`s name had been cleared by Zardari but Gilani conveyed to him that the matter needed to be reconsidered because Sharif had serious reservations over the appointment.
After Salmaan Taseer`s assassination by a police guard for criticising the blasphemy law, Khosa had appeared as a front-runner for the slot. The PML-N, which rules Punjab, had an uneasy relationship with Taseer, who was a confidant of Zardari.
The President often used the late Governor to target the PML-N chief and his brother, Punjab Chief Minister Shahbaz Sharif.
"The PML-N has attached another string to its 10-point reforms agenda ? appointment of the new Punjab Governor should be made in consultation with it," the official in the Prime Minister`s House said.
After Gilani`s telephonic conversation with Sharif last week, the Prime Minister had deferred his advice to the President to appoint Khosa as Governor.
Gilani has agreed to implement Sharif`s 10-point agenda within a 45-day deadline set by the PML-N chief.
"Former Prime Minister Nawaz Sharif spoke about allegations of corruption against Khosa, the former Attorney General and adviser to Gilani, and said it would not be in the interest of the most populous province to have a tainted Governor," the official said.
"I must say that Khosa is unlucky because he had made all preparations to assume charge," said a senior PPP leader who did not want to be named.
He was of the opinion that it would be unfortunate to single out Khosa because corruption charges had been levelled against all key leaders of the PPP.
"Now President Zardari will start the consultation process again after returning from his visit to the US," the PPP leader said.
Khosa was heavily backed by business tycoon Malik Riaz and it would be difficult for the PPP chief not to "oblige" him, the leader said.
Besides the PML-N factor, Law Minister Babar Awan, who has a lot of support in the lawyers` community, too lobbied against Khosa.
"Both are rivals," the PPP leader said. "While the PML-N wants to have its say in the process there is no consensus on a name in the PPP."
Other candidates for the post include gas utility official Mian Misbahur Rehman, PPP secretary general Jehangir Badr, Zarai Taraqqiati Bank Chairman Zaka Ashraf, Information Minister Qamar Zaman Kaira, Defence Minister Ahmed Mukhtar and Evacuee Property Board Trust Chairman Asif Hashmi.
Some supporters and admirers of the slain Governor had suggested the name of his widow Aamna Taseer for the post but Zardari decided against appointing her after consultations with his aides.