Ghulam Ahmed Bilour, who heads the Railway Ministry, said the reward would be given to the person who kills the filmmaker.
He contended there was no other way to protest and instill fear among blasphemers than to murder of the filmmaker.
He also called on members of the banned Taliban and Al Qaeda for their support, saying members of these organisations too will be rewarded if they eliminate the maker of the blasphemous film.
Mr Bilour's announcement, made during a news conference in the northwestern city of Peshawar, caused consternation as he belongs to the secular Awami National Party (ANP) that rules Khyber-Pakhtunkhwa province and is part of the ruling coalition at the centre.
Political leaders expressed shock at his remarks as the Taliban has killed scores of workers and leaders of the ANP.
His remarks came a day after violent protests across Pakistan resulted in 23 deaths and destruction of property worth billions of rupees.
Surprisingly, Mr Bilour acknowledged that he was committing a crime by instigating people to murder but said he was prepared to be a criminal for this cause.
"If there is a case lodged against me in an international court or in this country's courts, I will ask people to hand me over to (foreign countries)... I want to show these countries that we will not tolerate such things," he was quoted as saying by the Pakistani media.
At least 30 people have died so far in unrest connected to the film in over 20 countries. More than 20 people have been killed in violent protests in Pakistan.