SP Vaid, the province's inspector-general of police said that heavily-armed guerrillas kidnapped a large number of Hindus from southern Kashmir's mountainous Doda district late on Sunday before killing at least 22 of them.
"They were lined up and shot dead," Vaid said in Jammu, winter capital of Indian Kashmir, on Monday.
Nine people were wounded, five critically.
The guerrillas attacked two villages in the Doda district, which borders Pakistan, at around 11.30pm (1800 GMT) rounding up the Hindus, mostly shepherds, before opening fire on them, the official said.
One survivor said some of the assailants were wearing army uniforms and coaxed people out of their homes by claiming they were soldiers sent to meet with villagers.
"When we assembled outside the home of the village head ... they showered bullets on us," said Gyan Chand, one of five people wounded in the attack.
Rakesh Kumar, another witness, said some of the attackers were dressed in police uniforms while others wore the traditional Kashmiri dress - a long, loose shirt and trousers.
"It was a late hour knock," he said.
"I told my brother not to open the door but he didn't listen and was whisked away to a nearby spot where he was shot"
"I told my brother not to open the door but he didn't listen and was whisked away to a nearby spot where he was shot."
He said the guerillas split themselves into two groups before opening fire. "They attacked two localities simultaneously."
More than 500 families live in the area and a majority of them are Hindus, he said.
The massacre, one of the biggest in recent months, took place just days before Manmohan Singh, the Indian prime minister, holds talks with Kashmiri separatists in New Delhi and later travels to the violent region for a "roundtable" conference with Kashmiris.
Singh condemned the attack and said: "People of Kashmir have rejected and rebuffed terrorists repeatedly."
Police said they sounded an alert after one of the injured survivors was spotted by security forces in Kalhand village.
Commandos from Kashmir's Special Operations Group have joined army reinforcements at the site of the massacre to begin a manhunt.
The Hizbul Mujahideen, the largest Kashmiri separatist group, denied any role in the attack.
Nine people were wounded
"We strongly condemn these killings which seem to be a conspiracy of Indian security agencies to malign the ongoing freedom struggle and mujahidin (fighters)," a spokesman of Hizbul Mujahideen said in a telephone call to local newspaper offices in Srinagar, the state's summer capital.
In a separate killing on Sunday, suspected separatists shot and killed four Hindus after kidnapping 13 people from the nearby Kashmiri district of Udhampur.
"There is still no trace of the nine Hindus who were among the 13 abducted from the village of Vasantgarh," an army official told AFP.
"We are still searching for them," he added.
The latest killings came hours after the leader of India's rightwing Hindu organisation Bharatiya Janata Party (BJP) addressed a series of public rallies in and around Jammu, reports Yusuf Jameel, Aljazeera's correspondent in Srinagar.
Raj Nath Singh said his party was against the withdrawal of Indian troops from Siachen, the battlefield where India and Pakistan have suffered a combined toll of up to 5,000 in two decades.
Singh said the United Progressive Alliance federal government should not trust Pakistan, asserting that it had flouted the past agreements reached between the two countries.
At least 44,000 people have been
killed in the conflict since 1989
In a scathing attack on the government, he accused it of "not appropriately handling the Kashmir issue".
He also expressed unhappiness over what he described as New Delhi's "soft" approach towards Pakistan.
At least 44,000 people have died in violence linked to the separatist insurgency in Kashmir since 1989 when an anti-India rebellion flared in the Muslim-majority Himalayan region.
Kashmir has been the focus of frequent tensions between nuclear rivals India and Pakistan, who have fought two of their three wars over the disputed territory.
India has frequently accused Pakistan of supporting armed separatists and allowing them to cross into Indian territory to carry out attacks.
Pakistan denies the allegations, saying it gives only moral support to the right of Kahmiris to determine their own future status.