India says it launched air strikes against militants in Pakistani territory, in a major escalation of tensions between the two countries.
The government said strikes targeted a training camp of the Jaish-e-Mohammad (JeM) group in Balakot.
Pakistan said its jets had forced back the Indian planes and denied there were any casualties.
Relations between the countries were strained by a militant attack on Indian troops in Kashmir earlier this month.
India accuses Pakistan of allowing militant groups to operate on its territory and says Pakistani security agencies played a role in the suicide attack on 14 February, which was claimed by JeM and killed 40 Indian troops.
Pakistan denies any role and says it does not provide safe haven to militants.
Balakot is in Pakistan's north-western Khyber Pakhtunkhwa province. Residents there told BBC Urdu they were woken by loud explosions. Pakistan condemned the strike and said it would respond "at the time and place of its choosing".
The strikes are the first launched across the line of control - the de facto border that divides India-administered Kashmir from Pakistan-administered Kashmir - since a war between the two countries in 1971.
Both India and Pakistan claim all of Muslim-majority Kashmir, but control only parts of it. The nuclear-armed nations have fought three wars and a limited conflict since independence from Britain in 1947 - and all but one were over Kashmir.
What does India say happened?
Indian Foreign Secretary Vijay Gokhale told a news conference that the strikes had killed a "large number" of militants, including commanders, and had avoided civilian casualties.
"Credible intel [intelligence] was received that JeM was planning more suicide attacks in India. In the face of imminent danger, a pre-emptive strike became absolutely necessary," he said.
Indian Prime Minister Narendra Modi did not directly mention the air strikes when he addressed a political rally in Rajasthan later on Tuesday but he told cheering crowds: "I understand your enthusiasm and your energy. Today is a day we bow before our heroes."
India is due to hold elections by the end of May.
In Srinagar city, in Indian-administered Kashmir, residents expressed concerns over the spike in tensions. "Whatever is happening between these two hostile neighbours, it's us who are in the middle of this war theatre," Shabir Aakhoon, a banker, said.
Local reporter Sameer Yasir says a heavy military build-up in the past three days has caused panic. Anticipating full-scale war, civilians have stockpiled food and crowded petrol pumps, triggering traffic jams in many places, he adds.
How has Pakistan responded?
Pakistan's army spokesman Major General Asif Ghafoor said the strikes caused no casualties. He tweeted that Pakistani jets were scrambled and forced the Indian planes to make a "hasty withdrawal", dropping their payload in an open area.
Indian aircrafts intruded from Muzafarabad sector. Facing timely and effective response from Pakistan Air Force released payload in haste while escaping which fell near Balakot. No casualties or damage.— Maj Gen Asif Ghafoor (@OfficialDGISPR) February 26, 2019
Pakistani Prime Minister Imran Khan later convened an urgent meeting of national security chiefs and condemned "irresponsible Indian policy".
"Once again [the] Indian government has resorted to a self-serving, reckless and fictitious claim," a statement issued after the meeting said. "This action has been done for domestic consumption, being in an election environment, putting regional peace and stability at grave risk."
Mr Khan has summoned a special meeting of the National Command Authority (NCA) - the body that oversees Pakistan's nuclear arsenal - to take place on Wednesday, officials said.
Tensions reach a dangerous level
Analysis by M Ilyas Khan, BBC News, Islamabad
The Indian air strikes that hit a target inside Pakistani territory have taken tensions to a dangerous level.
In September 2016, an attack on an Indian army base in Uri created a similar situation when Delhi decided to respond with so-called "surgical strikes".
India's claims that they airdropped special forces to destroy militant camps on the Pakistani side of Kashmir were found to be largely exaggerated, but Indian troops did cross at several points along the Line of Control (LoC), inflicting some casualties on Pakistani forces.
This time they have hit a target across the international border, inside Pakistani territory, at a location where a training camp of Kashmiri militants is known to have existed for several years.
Pakistan's military has cordoned off the area and not even the local police are allowed in, so it will be some time before details of the attack become known.
Also, Pakistani officials have been underplaying the severity of the incident by describing it as a strike "across the LoC", not one across the international border.
Pakistan has vowed to respond but this may not go beyond diplomatic measures. However, as some observers point out, there may be punitive attacks by militants against Indian forces in Kashmir "at an appropriate time".
Timeline of India-Pakistan tensions
October 1947: First war between India and Pakistan over Kashmir just two months after they become independent nations.
August 1965: The neighbours fight another brief war over Kashmir.
December 1971: India supports East Pakistan's bid to become independent. The Indian air force conducts bombing raids inside Pakistan. The war ends with the creation of Bangladesh.
May 1999: Pakistani soldiers and militants occupy Indian military posts in Kargil mountains. India launches air and ground strikes and the intruders are pushed back.
October 2001: A devastating attack on the state assembly in Indian-administered Kashmir kills 38. Two months later, an attack on the Indian parliament in Delhi leaves 14 dead.
November 2008: Co-ordinated attacks on Mumbai's main railway station, luxury hotels and a Jewish cultural centre kill 166 people. India blames Pakistan-based group Lashkar-e-Taiba.
January 2016: Four-day attack on Indian air base in Pathankot leaves seven Indian soldiers and six militants dead.
18 September 2016: Attack on army base in Uri in Indian-administered Kashmir kills 19 soldiers.
30 September 2016: India says it carried "surgical strikes" on militants in Pakistani Kashmir. Islamabad denies strikes took place.