Prime Minister Nawaz Sharif also approved a new constitution of the Pakistan Cricket Board (PCB), Attorney Salman Butt told the Islamabad hearing into the country's cricket affairs.
Since May 2013, Zaka Ashraf and Sethi have been in and out of the PCB chairman's seat leading to a game of musical chairs which eventually led to the Supreme Court taking action.
"The government through the AG (Attorney General) today informed the Supreme Court that it had approved a new constitution under which elections will be held for the chairman's post in 30 days time," the legal advisor of the government in the court hearing, Irfanullah Khan, told Reuters.
"Justice (retired) Jamshed Ali Shah has been appointed as interim chairman and chief election commissioner to hold the elections," he added.
Since February Ashraf has twice been reinstated as chairman of the board by the Islamabad High Court while Sethi has twice replaced him either on court orders or government involvement.
The government filed an appeal in May after Ashraf was restored by the High Court for the third time.
The prime minister, who is chief patron of the board, had in February appointed Sethi as Chairman with a management committee to run cricket affairs.
Sethi tweeted that he has been nominated by the Prime Minister as a member of the PCB interim Board of Governors and is eligible to contest the election for Chairman.
(Editing by Tony Goodson)
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