Opposition parties also sought a statement from the Home Minister on the issue, which the government agreed.
Raising the issue during Zero Hour, Leader of Opposition Ghulam Nabi Azad said the enquiry in 1993 Bombay blasts had established that Dawood was the culprit.
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In the last 20-22 years, he said the stand of the successive governments, whether that of "Atal or Congress" or any other party has been that Dawood lives in Pakistan.
"Our intelligence agencies have knowledge about his residence and location. We expect the same (stand) from this government. We profusely regret this (that government does not know location of Dawood). This (statement) has maligned the image of the country as never before," he said.
Maintaining that on several occasions India has given proof to Pakistan of Dawood's involvement, Azad demanded a statement from the Home Minister on the issue.
The senior Congress leader said during the last general election campaign the UPA government used to be blamed for not being able to get Dawood back from Pakistan.
CPI(M) leader Sitaram Yechury also demanded a statement from the Home Minister on the matter.
Minister of State for Parliamentary Affairs Mukhtar Abbas Naqvi assured the House that the Home Minister will make a statement.
In a written statement in Lok Sabha yesterday, the Centre had said the location of Dawood Ibrahim was not known to the government and once he is located, his extradition process will be initiated.
However, later Minister of State for Home Kiren Rijiju said the underworld don lives in Pakistan and the Centre would continue to pursue the case very seriously.
The name of Dawood, who is wanted in connection with 1993 Mumbai serial blasts, figures in almost all the dossiers that have been handed over to Pakistan since the NDA rule in early 2000.
Dawood, who has been listed as Specially Designated Global Terrorist by the United States for his alleged links with al Qaeda terror group, vanished from Mumbai between 1992-93 and settled in a Gulf country.
The CBI has alleged that he conspired with the ISI to carry out the serial blasts in Mumbai in which 257 people were killed and property worth Rs 32 crore damaged.