Pakistan's military said on Tuesday that Indian military aircraft crossed into its territory in the disputed Kashmir region and "released a payload" after Pakistan scrambled its own jets.
The confrontation follows escalating tensions between the nuclear-armed rivals since the Feb 14 suicide bombing in Kashmir, when 40 Indian paramilitary police were killed by a Pakistani-based militant group.
New Delhi blamed Islamabad, which denies having a role in the attack.
"Indian aircrafts intruded from Muzafarabad sector," Pakistani military spokesman Major General Asif Ghafoor said on Twitter early on Tuesday, referring to an area in the Pakistan-administered part of Kashmir.
Ghafoor said "facing timely and effective response from Pakistan Air Force", the Indian aircraft "released payload in haste while escaping which fell near Balakot. No casualties or damage".
Following the statement from Pakistan, India's foreign ministry said a 'very large number' of militants killed in air strike, contradicting the former's claim.
An Indian junior minister also said the air strike across the Kashmir ceasefire line "completely destroyed" a militant camp.
"Air Force carried out aerial strike early morning today at terror camps across the LoC and completely destroyed it," minister of state for agriculture, Gajendra Singh Shekhawat, said in English on Twitter, referring to the Line of Control that divides the Indian- and Pakistani-administered parts of Kashmir.
Pakistan foreign minister Shah Mahmood Qureshi said that "better sense" should prevail in India. Qureshi warned India not to challenge Pakistan and said "better sense should prevail in India", according to a statement cited by state-run Radio Pakistan.
"The Foreign Minister said the nation should not be worried over the Indian act as the defenders of the country are fully prepared to respond to any misadventure," Radio Pakistan added on its website.
Balakot, a town in the Khyber Pakhtunkhwa province in Pakistan, is about 50km from the Line of Control (LoC), which acts as a de facto border between the two countries that have fought three wars since their independence from British colonial rule in 1947.
Shelling across the Kashmiri Line of Control has frequently occurred over the last few years, while tensions between the neighbours have been simmering, but airspace violations are rare.
In 2016, following another large attack on Indian security forces in Kashmir, New Delhi said its troops crossed the LoC and carried out a "surgical strike" on suspected militant camps across the border in Pakistan Kashmir. Islamabad denied anything serious occurred.