Thursday's clash was the first deadly incident on the India-Pakistan border in Kashmir three months [Reuters]

Reports say three Pakistani soldiers have been killed and one Indian soldier has been wounded in an exchange of fire across their border in divided Kashmir.

Both sides accused each other of opening fire early on Wednesday, which came amid tentative diplomatic moves being taken to make peace between India and Pakistan.

Indian forces opened "unprovoked" fire across the de-facto border - the so-called Line of Control (LoC) - at soldiers who got lost in bad weather in the Neelum river valley while moving between posts, Major-General Athar Abbas, a Pakistani military spokesman, said.

"This was started by the Indian side - completely unprovoked firing, breaking the ceasefire, and after search of 24 hours their bodies were recovered."

'Unprovoked firing'

Pakistani forces returned fire in retaliation and the incident was raised with local Indian commanders, he said.

Lieutenant-Colonel JS Brar, a spokesman for the Indian army in Kashmir, said the Pakistanis opened shooting first.

"There was a ceasefire violation by Pakistani troops in [northern] Keran sector that left our soldier injured," Brar told the AFP news agency.

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"They opened fire first and we retaliated ... In the morning they [Pakistani troops] again resorted to unprovoked firing ... they started firing mortars again and we retaliated," Brar said, adding that the firing had now stopped.

The incident - the first one in three months to cause deaths - underlined the fragility of ties between the countries that have fought three wars since 1947.

The two sides have made cautious attempts at peace, most recently meeting in the Indian capital of New Delhi in July, where foreign ministers hailed a new era in ties, and agreed to fight militancy and boost trade and travel.

India and Pakistan agreed to a ceasefire along the Line of Control in 2003, and a year later launched talks aimed at brokering a regional peace.

India and Pakistan in February resumed a formal peace process broken off after the 2008 attack on Indian's financial capital of Mumbai blamed on Pakistan-based fighters, which killed 166 people.

Pakistan denies allegations that it helps Islamic groups in Kashmir.