Indian Foreign Secretary Nirupama Rao said in a recent television interview that Pakistan was sending militants across the border to destabilize the country.
"It has been clear that militancy had been an instrument of state policy, which has been pursued by agencies within Pakistan," said Rao.
Islamabad accused New Delhi of "darkening" the region with such accusations, with the Foreign Ministry issuing a statement saying the Indian government was harming the chance for peace with its use of vitriolic propaganda, Pakistan's The News International reports.
India is "out of tune with the realities of today," the Foreign Ministry said.
Islamabad and New Delhi have traded barbs recently over skirmishes associated with the disputed region of Kashmir. Pakistani paramilitary forces on Monday accused Indian troops of opening fire on their positions in Lahore using automatic weapons. India denied the allegations.
Tensions between the two nuclear-armed foes escalated in the wake of a November 2008 raid on high-profile targets in the Indian resort city of Mumbai. Lashkar-e-Toiba, a Pakistani militant group, claimed responsibility for the attack.