Prime Minister of Pakistan Yousaf Raza Gilani named a new general to head country's top spy agency, Inter Intelligence Service (ISI), Friday.

The appointment of Lt. Gen. Zahir ul-Islam as the director general of the ISI has ended speculations about another extension of the term of Lt Gen Shuja Pasha.

Lt. Gen. Zahir Ul-Islam is currently serving as an army corps commander in Karachi and has been appointed as ISI chief, based on the recommendation of Pakistan's military chief Gen. Ashfaq Pervez Kayani, according to a statement from prime minister's office.

He is replacing Lt. Gen. Ahmed Shuja Pasha who is retiring on March 18. Pasha is very close to Kayani and had got two extensions of term in the office, after reaching the age of retirement in 2010.

Islam, who comes from a military family in the Punjab province, has served in several key positions in Pakistan's army and intelligence wings and is also believed to be close to Kayani.

The ISI is Pakistan's most powerful spy agency and plays a key role in combating insurgency and terrorism in the region. The agency is said to be playing a critical role in the U.S.-Pakistan anti-terrorist intelligence information network.

The prime minister's office has not released any further information on the appointment and it is yet to be seen how the new appointment will impact the Pak-U.S. relations.

Pasha was under scanner for his failure to gather prior information about the U.S. operation that killed Osama bin Laden in last May.

He was also blamed responsible for escalating the tensions between the military and civil government last year and for an alleged plan of military coup to destabilize the elected government.