Gordon Brown is now expected to meet the Dalai Lama when the Tibetan leader arrives in Britain in May, if the violence in Tibet has died down.
But the Prime Minister faced criticism of "dithering" over the visit by refusing to confirm that he will meet him, which would risk antagonising the Chinese government.
Chinese authorities have accused the Dalai Lama of inciting the crowds in Lhasa to violence, and exploiting the publicity surrounding the Beijing Olympics. But the Dalai Lama strongly denied the claims. He also sought to defuse the crisis by saying he was willing to step down as head of the Tibetan government in exile.
The visit has become a dilemma for Mr Brown, who visited China in January to foster good relations.
David Cameron, the Tory leader, and Nick Clegg, the Liberal Democrat leader, have made commitments to meet the Dalai Lama in London. Mr Cameron accused Mr Brown of dithering and may try to embarrass him again today at Prime Minister's Questions over his reluctance to upset the Chinese. Senior sources close to Mr Brown said he had not ruled out meeting the Dalai Lama, but they emphasised that a decision would be announced nearer the time. "The priority at the moment is to deal with the issues in Tibet," Mr Brown had earlier told MPs.
The extreme sensitivity of such a meeting was underlined when the Chinese ambassador to London, Fu Ying, met Mr Cameron and was told he would meet the Dalai Lama. "She threw a hissy fit," said a Conservative shadow minister. "It was made pretty clear to David that it would be regarded as highly unhelpful."
Downing Street is playing down the status of the Dalai Lama to spiritual leader rather than the political leader of Tibet in exile.