Sugar, whose appointment to the new role dovetails with the end of the latest 'The Apprentice' series, said he was brought in by Gordon Brown to act as an advisor on business matters. Speaking to Sky News he denied the position would be a "political thing".
Asked whether a peerage would mean he would be taking the Labour whip in the House of Lords, Sugar said he was unsure what that meant.
The government later clarified the situation and said Sugar would become a Labour peer.
The appointment drew the attention of the Conservatives who said Sugar's new role broke BBC impartiality guidelines.
Shadow Culture, Media and Sport secretary Jeremy Hunt said he had written to BBC governor Sir Michael Lyons to explain what guidance the corporation gave to Sugar and whether it knew he was going to become a Labour peer.
He said: "Presenting a programme for the BBC and working for the Government on the same issue is totally incompatible with the BBC's rules on political independence and impartiality.
"Sir Alan Sugar needs to make a choice between his role in 'The Apprentice' and his role as the Government's business tsar."
Sugar has never made any secret of his allegiance to the Labour party and was reportedly asked about becoming a mayoral candidate to challenge Boris Johnson at the next election. He has also spoken at Labour fundraising rallies.
The BBC, in a statement, said: "Sir Alan is in discussions with us about his plans and has assured us that he is determined not to do anything that would jeopardise his work at the BBC which is something he greatly values."
However it was unable to comment on what would happen if he became a Labour peer, stating only that the role had not yet been fully defined.
Many business analysts have queried whether Sugar was the right man for the role and whether his appointment had more to do with the TV show than his business credentials.
If so it would not be the first time Gordon Brown has got involved with the reality TV world.
Last week he revealed in a television interview that he had contacted both Simon Cowell and Piers Morgan, judges on 'Britain's Got Talent', to enquire into the well-being of singer Susan Boyle.
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