In a joint statement at the conclusion of two days of talks in New Delhi, officials said on Sunday the dedicated secure hotline was intended to "prevent misunderstandings and reduce risks relevant to nuclear issues."
The joint statement said an existing hotline between director generals of military operations in both countries also would be upgraded and secured.
Experts from both sides, which have gone to war three times since independence from Britain in 1947, also reaffirmed their moratorium on conducting further nuclear tests, "unless, in exercise of national sovereignty, it decides that extraordinary events have jeopardized its supreme interests."
India and Pakistan carried out nuclear tests in May 1998, provoking military and economic sanctions by the United States and its allies.
International fears of a nuclear confrontation were exacerbated when the two countries fought in the Himalayas in 1999, and came close to war again in mid-2002 when India blamed Pakistan for a deadly attack on its Parliament compound.
The talks are only the first stage in the nuclear dialogue.
A meeting on Saturday was led by top foreign ministry officials, Sheel Kant Sharma from India and Tariq Usman Haider of Pakistan.
The joint statement also said India and Pakistan would work toward concluding an agreement with "technical parameters on pre-notification of flight testing of missiles, a draft of which was handed over by the Indian side."
Pakistan's Ghauri missile is
capable of carrying N-warheads
Currently, the two countries have conflicting nuclear policies.
India says it would not be the first to use nuclear weapons. Pakistan has not committed to a no-first-strike doctrine.
In February 1999, former Indian Prime Minister Prime Minister Atal Bihari Vajpayee visited the eastern Pakistani city of Lahore, where the two sides signed a preliminary agreement to pursue a reduction of nuclear risks through a series of confidence-building steps.
These included advance notification of missile tests, an agreement both sides have adhered to.
But plans to hold further nuclear talks were thwarted as relations deteriorated after an attack on the Indian Parliament in December 2001, which New Delhi blamed on Pakistan's spy agency and Pakistan-based groups.
The joint statement said both countries would continue bilateral talks toward implementation of the 1999 Lahore agreement.
India's new Congress-led government is pursuing peace initiatives started by Vajpayee, ousted from power in April-May national elections.
The next round of talks will be held between the foreign secretaries on 27-28 June, in which they'll take up the thorny issue of Kashmir, the disputed Himalayan province that has been the flashpoint of two wars between India and Pakistan.