Information Minister Muhammad Ali Durrani and Deputy Interior Minister Zafar Warriach told reporters during wee hours of Wednesday that the government would respond to bullets with bullets.
They asked all those present in Lal Masjid to surrender like peaceful citizens or face action.
While exchange of fire continued between security forces and besieged students in the mosque till 3.20 am on Wednesday, Pakistan army took up positions in the city and set up pickets, denying movement to people.
The six-month stand-off between the radical clerics at the Red Mosque and the government turned violent with eleven people, including a Ranger, two seminary students, a mediaperson and a businessman killed in the sporadic exchange of fire between the Jamia Hafsa students and security forces on Tuesday.
The deceased have been identified as a reporter of Daily Markaz, a shopkeeper at the Aabpara market Abrez Ahmad, who was just closing his shop, three passersby and two students. One body is yet to be unidentified.
Over 100 people, including security personnel, mediapersons and seminary students were injured in the violence, with at least 30 people -- mostly female students -- hospitalised with bullet injuries.
As the gunshots rang out, a loudspeaker announcement from the mosque urged fidayeen (suicide attackers) to prepare themselves.