Five Indian soldiers were killed in an ambush along the disputed border with Pakistan in Kashmir, India has said.
The clash threatens to derail renewed efforts to resume peace talks between the nuclear-armed rivals.
India's defence minister said about 20 militants, along with others in Pakistani military uniforms, carried out the attack on an Indian army post in Poonch.
It was one of the worst attacks since the two countries agreed to a ceasefire in 2003.
Pakistan rejected allegations of its involvement in the attack as "baseless and unfounded", saying it was committed to its ceasefire promises and wanted to resume peace talks with India soon.
The attack puts the Indian government under pressure to respond aggressively as it heads into a tough election next year.
"The peace talks were in any case quite tentative, and they have now certainly suffered a serious blow," said Brahma Chellaney, a professor of strategic studies at the Centre for Policy Research think tank in New Delhi.
A government source said India summoned Pakistan's deputy envoy to New Delhi and lodged a protest over the killings near the Line of Control dividing the region.
Indian army sources said the attack took place in the early hours about 450 metres inside Indian territory, where six soldiers were on patrol. One soldier survived.
It came just as India was considering dates proposed by Pakistan to resume talks that were suspended in January after two Indian soldiers were killed, including one who was decapitated, in a clash on the border.
An Indian army officer in Kashmir said the raid in January in which two soldiers were killed was carried out by Pakistan's Border Action Team.
The unit includes members of Pakistan's commando Special Services Group and irregular forces like Lashkar-e-Taiba, a Pakistan-based militant group.
The army sources blamed the Border Action Team for today's attack.
The killings have caused uproar in the Indian parliament as lawmakers demanded the government explain what happened.
A lasting peace between Pakistan and India, which have fought three wars since they were carved out of British colonial India in 1947, has long proved elusive.
