The discussions, the first between the two prime ministers, will be the highest-level meeting of the nuclear-armed neighbours in 15 months.
The meeting was slated a day after Shiv Shankar Menon, India's foreign minister, said the bilateral dialogue was in "a state where it hasn't been in the past four years because we face a situation where things have happened in the recent past which were unfortunate".
India has blamed "elements" in Pakistan - by which it refers to the state spy agency, the Inter-Services Intelligence (ISI) - for a bomb attack on its Kabul embassy last month in which about 60 people were killed, including New Delhi's military attache to Afghanistan.
Pakistan has repeatedly denied the allegation.
Hamid Karzai, the Afghan president, told delegates at the summit that terrorism was spreading "like wild fire" in South Asia, particularly in Pakistan, and receiving institutional support.
"In Pakistan, terrorism and its sanctuaries are gaining a deeper grip as demonstrated by the tragic assassination of Benazir Bhutto," he said at the opening of a regional summit, referring to the dead Pakistani opposition leader.
Terrorism is the most "menacing" challenge faced by South Asia, home to 1.5 billion people in eight countries, he said.
"We need collective action to wipe out terrorism in the region," added Karzai, whose government is battling a Taliban rebel-led insurgency and whose relations with neighbouring Pakistan have been going steadily downhill in the past few months.
Meanwhile, at least 11 soldiers and seven Tamil rebels were killed in fighting in northern Sri Lanka on the eve of the summit.
|Government troops and the Tigers clashed on the eve of the summit [AFP]
The battle broke out when a military advance in the Mallavi area, deep inside rebel-held territory, met with resistance from the Liberation Tigers of Tamil Eelam (LTTE).
"We suffered 11 soldiers killed and 20 wounded and the terrorists lost seven killed and 27 wounded," a government spokesman said.
The fighting had subsided by Saturday morning, he said.
Colombo, which believes it has the upper hand in the conflict after driving the rebels from their eastern stronghold, has sharply beefed up security in and around the capital of 650,000 residents.
Minelle Fernandez, Al Jazeera's correspondent in Colombo, said the Sri Lankan government was taking no risks "even though the LTTE declared a unilateral ceasefire over a week ago in light of the summit and said that they wish the summit the best success".
"In fact, security within the capital and around the capital is very heavy. All eight leaders have arrived with heavy security back-up," she said.
String of attacks
The fighting is taking place 250km to the north, but there has recently been a string of deadly attacks on the capital that the government has blamed on the rebels.
In late July, the LTTE declared a unilateral ceasefire, but Colombo brushed off the proposal and stepped up attacks against rebel positions in the north.
The Tamil Tigers are fighting for a separate Tamil homeland in the majority Sinhalese nation.
The defence ministry said helicopter gunships were deployed to provide cover for ground troops engaged in Friday's battle.
The Tamil Tigers said they had resisted a major military onslaught and claimed killing 30 soldiers and wounding another 60. The rebels did not give their casualties.
The pro-rebel Tamilnet.com website said the Tigers had also seized a troop carrier that was trying to evacuate wounded soldiers.