The new site, youtube.com.pk, is currently live but inaccessible inside Pakistan, and the government and Google hope its creation will mean the Supreme Court will lift the ban, even if only partially.
Content on the local site can still be regulated, and a senior government official told AFP Wednesday Pakistan's telecommunication authority could ask Google to remove content it deems objectionable.
If Google complies, it could meet a condition set by the Supreme Court for lifting the ban.
"The understanding is that on the localised version offensive and blasphemous content could be blocked by Google on the government's request," the official said.
A Google spokesman confirmed that governments are allowed to request the removal of YouTube videos that violate local laws.
"We have clear community guidelines, and when videos violate those rules, we remove them," the spokesman said.
But the Internet giant said it would review requests before taking videos down.
"Government requests to remove content will continue to be tracked and included in our Transparency Report."
Islamabad has been in intermittent talks with Google for several years over the issue, another source close to the matter said, without providing a specific timeframe for the unveiling of YouTube Pakistan.
"We are in a very near-term sort of thing. The roadblocks have been removed," the source said.
A Supreme Court official meanwhile said the next court hearing about the ban is in two weeks.
Users in Pakistan continue to access YouTube using proxy servers and Virtual Private Networks.
Blasphemy is a contentious issue in Pakistan and the country has seen violent riots sparked by content considered offensive to Islam.
In 2010 Pakistan shut down Facebook for nearly two weeks over its hosting of allegedly blasphemous pages. It continues to restrict thousands of online links.
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