Three possible pipelines to India are being investigated - from Iran through Pakistan, from Turkmenistan through Afghanistan and Pakistan and from Myanmar through Bangladesh, he said.
Indian industry welcomed the cabinet's nod saying that the Iran-Pakistan-India gas pipeline would be the cheapest option.
The $4-billion gas pipeline from Iran via Pakistan to import gas had been proposed for meeting the growing energy needs of Asia's fourth-largest economy.
"This is a very significant decision because it gives energy security," Aiyar told reporters after a cabinet meeting.
Pakistan stands to earn millions of dollars in transit fees from the pipeline that would bring gas across its land from Iran, which has the biggest reserve of gas in the world after Russia.
Negotiations on the 1,600-kilometer Iran-Pakistan-India pipeline began in 1994 but the proposal has made little headway due to tensions between Pakistan and India.
"A land-based pipeline would be four times cheaper than any other option, promote regional energy security and create a multiplier effect on income and employment in the respective countries," said Onkar Kanwar, president of the Federation of Indian Chambers of Commerce and Industry.
He added the project was a "potential conduit for peace" between India and Pakistan apart from the commercial dividends.
"Inter-linked power and gas networks will lead to energy interdependence between India and Pakistan which may help reduce tensions and create an amicable atmosphere for dialogue between India and Pakistan," he said.
Only 30 percent of India's oil needs are met from domestic sources and this is expected to halve as the country's appetite for energy expands.
India is expected to pip South Korea next year as the second-largest oil consumer in the Asian region, which is seen guzzling a larger share of global production in coming years as India and China step up economic growth.
Analysts say large transnational pipelines would be viable in the region only if the gas reaches India's vast market.
Last month, India, Bangladesh and Myanmar agreed in principle to co-operate in a gas exploration and overland pipeline project that would send gas to India.
India is predicted to require 400 million cubic meters (14,125 million cubic feet) of gas per day by 2025, up from today's 90 million cubic meters.