India invited Sharif and other South Asian leaders to attend Modi's swearing-in on Monday. If he does attend, it would be a first in the history of the nuclear-armed rivals who have fought three wars since independence in 1947.
"The invitation was received yesterday," Pakistani foreign office spokeswoman Tasneem Aslam told reporters. "A decision whether the prime minister would attend or not will be taken some time today."
After his own election last year, Sharif's administration had also suggested that the Indian prime minister be invited to attend the ceremony, but Modi's predecessor, Manmohan Singh, declined.
Sharif came to power promising to rebuild relations with India but he has been under pressure to toughen his stance from hardliners at home, particularly within the army.
Modi's party has long advocated a tough stance on Pakistan, a view reflected in his vigorous election campaign, and the new Indian leader is seen as an uncompromising hardliner on issues of national security.
But Aslam said Pakistan saw this as a chance to improve relations.
"We hope the dialogue process between India and Pakistan will resume," she said. "It would be a meaningful dialogue, it would be constructive talks, and it would be dialogue with a view to resolving outstanding disputes between our two counties so that this region could have durable peace."