The 34-year-old Hafeez, who has been banned by the International Cricket Council (ICC) from bowling for 12-months, has been given clearance to bowl by the Pakistan Cricket Board.
"There is a ICC rule which says that the home board can permit a player banned from bowling in international cricket to bowl in domestic cricket," chief selector Haroon Rasheed told PTI.
"The idea behind this is to allow the home board to monitor the bowling action of the player and whether he has shown improvement with his modified bowling action," Rasheed explained.
"We are monitoring his bowling action and umpires have been told to show no leniency at all if they feel his bowling action is questionable," he added.
Hafeez was handed a 12-month ban by the ICC in July and later failed the ICC bowling assessment carried out in Chennai leading to his ban from bowling for a year.
Rasheed said under ICC rules Hafeez can now only reappear for a bowling assessment review after 12-months so the home board is given the option of working on his action and to monitor his progress in domestic cricket.
A ICC official also confirmed to a cricket website that a bowler suspended in international cricket can bowl in domestic cricket with the permission of his home board.
Hafeez was first reported for a suspect bowling action in November 2014 when Pakistan was playing Tests against New Zealand in Abu Dhabi. Subsequently, he was suspended from bowling in December after assessments at the Loughborough University in Leicestershire, but was cleared in April after re-testing at Chennai s Sri Ramachandra University.
However, his action was once again reported during Pakistan's Test match against Sri Lanka in Galle in June and he subsequently failed the bowling test in Chennai.