Sixty-year-old Malik, who has been an advisor to Gilani earlier also, will continue to supervise the affairs of the interior ministry.
"The president, on the advice of the prime minister has appointed Rehman Malik as advisor to the prime minister on interior, with the status of federal minister," said President Asif Ali Zardari's spokesman Farhatullah Babar on Tuesday.
Malik had held the post of advisor in 2008 before he was elected to the Senate or upper house of parliament the following year.
A Supreme Court bench led by Chief Justice Iftikhar Chaudhry had on Monday issued an interim order that suspended Malik's membership of the senate.
The bench passed the order after he was unable to produce a declaration issued by the United Kingdom border agency regarding the renunciation of his British citizenship.
The apex court asked Malik to prove by the next hearing on June 13 that he was not a British citizen when he contested polls to the Senate in 2009.
If he is unable to do so, the court will take further action against him, the order said.
On Tuesday, Malik did not attend office and removed the national flag from his residence and official vehicle.