The Pakistani national denies being the man photographed with an assault rifle in pictures taken at Mumbai's main train station, one of several sites targeted by the gunmen.
Kasab faces a string of charges in connection with the attacks by 10 heavily armed gunmen on multiple targets in India's financial capital, including "waging war" on the country, murder and attempted murder.
A verdict is expected early next year. Kasab could be executed if found guilty.
At least 166 people died in the attacks, in which 10 men armed with rifles stormed two luxury hotels, a Jewish centre and the train station. Nine of the gunmen were killed.
Speaking outside court, prosecution lawyer Ujjwal Nikam dismissed Kasab's claims as his latest "U-turn" and said it would not affect the trial because there was "strong and clinching evidence" against him.
The prosecution has presented security camera footage and press photographs that they say show Kasab and an accomplice, Abu Ismail, at the station with powerful AK-47 assault rifles.
DNA and fingerprint evidence matching Kasab has also been produced.
|If found guilty of involvement, Mohammad faces execution [AFP]
But Kasab told the court: "If you see, all witness accounts are similar. They talk about a tall guy and a short guy. This shows that the police have told these people to identify me as a terrorist.
"I have learnt from the police that the short guy is dead. His name is Abu Ali."
Abu Ali was one of the four gunmen killed during the 60-hour siege at the luxury Taj Mahal Palace and Tower hotel.
Kasab said he had initially travelled by train to Mumbai - home of the Bollywood film industry -"to see cinema" and was picked up by police on a beach in the northern suburbs 20 days before the attacks.
The 22-year old said he was initially brought into police custody after wandering around the city late at night, looking for a place to stay. His Pakistani citizenship aroused suspicion, he said.
Kasab also claims that police took him from his cell on the day the attacks started because he resembled one of the gunmen, and then shot him to make it look as if he had been involved in the attacks and re-arrested him.