Pakistan said Indian troops had raided a military post in the Haji Pir sector of Pakistani-administered Kashmir, killing a soldier and injuring another.
An Indian army spokesman said Pakistan had “initiated unprovoked firing” at Indian military posts.
Kashmir is claimed by both nations in its entirety and has been a flashpoint between them for more than 60 years.
Exchanges are not uncommon but rarely result in fatalities.
The Pakistani military’s public relations office said the two sides were still exchanging fire in the area.
It said Indian troops had “physically raided a checkpost named Sawan Patra”.
The Haji Pir Pass is just south of the main road from Muzaffarabad in Pakistan-controlled Kashmir to Srinagar in Indian-administered Kashmir.
“Pakistan army troops effectively responded to the attack,” it said, adding that Indian troops had left behind weapons as they retreated.
Colonel Brijesh Pandey, a spokesman for the Indian army in Kashmir, told the Associated Press news agency that Pakistani troops had “initiated unprovoked firing” with mortar shells and automatic weapons at Indian military posts. One civilian home was destroyed, he said.
“We retaliated only using small arms. We believe it was clearly an attempt on their part to facilitate infiltration of militants,” Col. Brijesh Pandey said.
There has been a ceasefire in Kashmir since late 2003.
India suspended a peace process with Pakistan following attacks by Pakistan-based militants in Mumbai in 2008. Negotiations resumed in February last year.
Last month, the nations signed an agreement to ease visa restrictions on travel for some citizens.
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