Indian and Pakistani officials say their armies traded heavy artillery fire overnight along the Line of Control (LoC) which divides the disputed Kashmir region.
Indian police say three Indian soldiers were killed and two civilians wounded in the exchange of shelling in the Kargil, Tangdar and Gurez districts.
They say firing began on Friday afternoon and continued late into the night, causing damage in both military and civilian areas.
The upsurge in fighting follows several months of relative quiet along the LoC.
Pakistani officials said Indian soldiers had tried to open a new border post along the LoC and were beaten back.
The Indian Defence Minister, George Fernandes, is arriving in Kashmir on Saturday and is expected to visit forward locations and address the troops there.
Election fears
India and Pakistan have between them deployed around a million soldiers along the LoC and their international border since a militant attack on the Indian parliament in Delhi last December.
Delhi accuses Islamabad of arming and sponsoring separatist militants engaged in a violent campaign against Delhi's rule in Kashmir.
Pakistan denies this and says it only provides moral support for the "freedom struggle" in Kashmir.
The danger of a confrontation escalating to a war with the possibility of a nuclear exchange between the two neighbours has led to a series of high-profile visits by Western officials seeking to defuse tensions.
British and US foreign ministers were recently in the region.
French Foreign Minister Dominique de Villepin is meeting Pakistan's President Pervez Musharraf in Islamabad on Saturday after holding talks with India's Prime Minister Atal Bihari Vajpayee in Delhi on Friday.
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