Pakistan rejected on Tuesday India's claim that it killed "many militants" in an air strike earlier in the day, calling it a "self-serving, reckless and fictitious" claim.
Pakistan officials said that Indian warplanes did breach its airspace and drop a "payload" over Balakot in the country's northeast, but said there was no damage or casualties.
The National Security Council "strongly rejected [the] Indian claim of targeting an alleged terrorist camp near Balakot and the claim of heavy casualties," Foreign Minister Shah Mehmood Qureshi told a press conference in Islamabad.
Pakistan is also vowing to prove wrong India's claims and warning that it would retaliate against "Indian aggression."
Pakistan's National Security Committee (NSC), comprising top officials including Prime Minister Imran Khan and army chief Qamar Javed Bajwa, said in a statement that it "strongly rejected Indian claim," adding Khan would "engage with global leadership to expose irresponsible Indian policy."
It also warned that "Pakistan shall respond at the time and place of its choosing" to Indian aggression.
Balakot police chief Saghir Hussain Shah told The Associated Press that he had sent teams to the area where the Indian bombs reportedly hit, which he described as a mostly deserted wooded area.
“There are no casualties, there are no damages on the ground because of the dropping of the bombs,” he said.
There was no immediate explanation for the differing accounts, but India and Pakistan routinely contradict one another.
TRT World's Kamran Yousaf reports from Islamabad, Pakistan.
Qureshi said Indian claims have been made for domestic consumption ahead of the Indian general election.
Qureshi spoke after India claimed its warplanes attacked a militant camp where it claimed Pakistan-based fighters were preparing suicide attacks on its cities, escalating tensions between the rivals.
No clarification on Indian 'payloads'
A "very large number" of militants from the Jaish-e-Mohammad (JeM) group were killed in the night-time attack, according to the Indian Foreign Ministry.
Pakistan said its fighters scrambled to force the Indian jets back, and that they dropped payloads as they escaped.
Pakistan did not clarify what it meant by "payloads."
There have been no reports of any casualties in Pakistan.
The escalation came after a February 14 suicide bombing claimed by JeM that killed over 40 Indian troops in India-administered Kashmir, setting off a chain of threats and counter-warnings between the nuclear-armed neighbours.
Pakistan army also warned India, saying that it was now Islamabad's turn to " surprise" its rival.
"I said that we will surprise you, wait for that surprise. I said our response will be different, see it for yourself, the response will come," said Major General Asif Ghafoor, Pakistani military spokesman.
Pakistani villagers in the area said they heard four loud bangs in the early hours of Tuesday but reported only one person was wounded.
"We saw fallen trees and one damaged house, and four craters where the bombs had fallen," said Mohammad Ajmal, a 25-year-old who visited the site.
China, OIC, EU call for restraint
Long-time Pakistan ally China and the European Union urged India and Pakistan to exercise restraint.
"We hope that India and Pakistan can exercise restraint, and take steps that are conducive to stabilising the regional situation and improving bilateral ties, rather than the opposite," Chinese Foreign Ministry spokesman Lu Kang told a daily news briefing in Beijing on Tuesday.
Pakistan has outlawed JeM and seized its properties in south Punjab's Bawahalpur area, including religious schools and mosques. India has demanded that JeM leader, Azhar Masood, be listed as a terrorist by the United Nations, but China has blocked this.
Impact of strikes on popular sentiment?
Indians took to the streets in celebration across the country on Tuesday to celebrate the contested strike.
Analysts speculated what effect the incident and escalation of tension might have on the standing of the Prime Minister Narendra Modi's government ahead of a general election.
Some analysts have suggested the strike could bolster patriotic sentiment against a backdrop of low farm incomes and weak jobs growth.
India's opposition leaders, many of whom have banded together against the ruling Bharatiya Janata Party (BJP) ahead of the election, congratulated the Indian Air Force (IAF), though they stopped short of praising Modi.
"I salute the pilots of the IAF," Rahul Gandhi, leader of India's main opposition Congress, said in a tweet.
Meanwhile, tensions escalated sharply on the de facto border Line of Control in Kashmir where both sides shelled each other's positions.
Indian firing killed at least four civilians and wounded 11 others in Pakistan-administered Kashmir, Dawn reported.
It reported Kotli district was the worst hit area to under heavy Indian attack.
Pakistani firing wounded at least five Indian soldiers, Greater Kashmir reported.