Pakistan has accused India of "warmongering" over deadly clashes at the Line of Control (LoC), while calling for talks to end a flare-up that India has said spelled the end of "business as usual".
Diplomats have warned against allowing a spate of cross-border killings to wreck a fragile peace process that had gradually warmed ties after a total break following the 2008 shooting and bomb attacks on Mumbai.
But foreign minister Hina Rabbani Khar spoke out after Pakistan reported another of its troops had been killed in "unprovoked" firing across the militarised border in the disputed region.
"We see warmongering," Khar said at the Asia Society in New York on Wednesday where she hit out at strident statements by Indian politicians over the new tensions.
"It is deeply disturbing to hear statements which are upping the ante, where one politician is competing with the other to give a more hostile statement," Khar added.
India says two of its soldiers have been killed in Kashmir, one beheaded, since hostilities erupted on January 6 along the Line of Control (LoC), the de facto border where a ceasefire has been in place since 2003.
It has demanded the return of the soldier's head which is still missing.
Pakistan however denies its forces are responsible for the killings and says three of its troops have been killed in the spate of incidents, the latest on Tuesday.
The nuclear-armed neighbors have fought three wars since their independence in 1947, two of them over the Himalayan region of Kashmir. But Khar said the neighbours had to get over their "narrative of hostility".
"The doors to dialogue are open," she said. "We need to meet at any level, I think we need to call each other, we need to become mature countries which know how to handle their truth."
Khar again denied Indian accusations that Pakistani forces had beheaded one of two soldiers that India says were killed on January 8. She said an inquiry had found "no evidence" of the deaths.
Her comments are likely to stoke further indignation in India, whose prime minister Manmohan Singh on Tuesday condemned the beheading as "unacceptable".
"It cannot be business as usual" with Pakistan, Singh said in his first public reaction to the attack which has caused outrage in the army's ranks.
"Those responsible for this crime will have to be brought to book," he added on the sidelines of an army function in New Delhi.
India's foreign minister on Tuesday reflected a growing sense of frustration in New Delhi at Islamabad's denial of responsibility, saying it only served to destabilise peace efforts.
"Such actions by Pakistani army... not only constitute a great provocation but leave us to draw appropriate conclusions about Pakistan's seriousness in pursuing normalisation of relations with India," Salman Khurshid said.
An Indian general also cranked up pressure on Pakistan, saying a meeting on the border Monday between the two militaries to calm tensions was fruitless.
"We accused them of carrying out the barbaric attack... we insisted that the head be returned," Lieutenant General KT Parnaik said.
After the collapse in ties following the 2008 Mumbai attacks, which India blamed on Pakistan-based militants, relations had been making steady progress, with talks focused on opening up trade and offering more lenient visa regimes.
But the mood has soured dramatically since the apparent tit-for-tat exchanges along the militarised border.
On Tuesday India was meant to begin allowing Pakistanis over the age of 65 to obtain a visa on arrival at the border in Punjab.
However the programme was put on hold until further notice only hours after Indian officials said it had come into force, although the delay was attributed to "technical" reasons.
Nine Pakistani players were also withdrawn from a new field hockey league in India and asked to return home just before Singh's comments.
Media reports on Tuesday also said the women's cricket World Cup, scheduled to be played in Mumbai from January 31 to February 17, could be affected due to Pakistan's participation.