The Pakistani Foreign Minister has dropped plans to visit India next month, throwing peace initiatives between the neighbours into a quandary.
In a statement, Pakistan said it was "regrettable" that India had objected to Foreign Minister Khursheed Mahmud Kasuri personally delivering an invitation to a forthcoming regional summit.
"The letter of invitation to Prime Minister Vajpayee would be delivered through other diplomatic channels," the statement added.
Leaders from the seven-nation South Asian Association for Regional Cooperation (SAARC) are due to hold their 12th summit in Pakistan in January. India has indicated that Prime Minister Atal Behari Vajpayee will attend it.
Kasuri's cancellation followed Indian Foreign Minister Yashwant Sinha's statement that the SAARC summit did not necessarily mean a forum for bilateral talks between India and Pakistan.
Islamabad interpreted India's comments as a snub.
"Sinha's remarks confirmed the apprehensions of all SAARC countries that India was not only disinterested in the SAARC process but also had no intention of engaging Pakistan in a dialogue to resolve all outstanding disputes including the core issue of Jammu and Kashmir," the statement by the Pakistani Foreign Ministry said.
Despite early signs of an improvement in relations, stepped up attacks by Muslim fighters in Indian-administered Kashmir have undermined chances of peace talks taking place.
India accuses Pakistan of abetting the fighting, a charge that Pakistan denies.