Pakistan says it has shot down two Indian military jets flying into its air space.
It comes after an airstrike by India in Pakistani territory on a training camp reportedly belonging to the Jaish-e-Mohammed network.
The terror group has claimed responsibility for a car bomb attack that killed at least 40 Indian police officers in the disputed territory of Kashmir in early February.
India and Pakistan -- both of whom are nuclear-armed -- claim all of Kashmir, but control only parts of it.
Following the latest developments, Pakistan's military has released a video it claims shows an Indian pilot it captured.
In the video, the man said to be the captured pilot, is being questioned by the Pakistani military.
((Question: "You hail from which place in India?"
Answer: "Am I supposed to tell you this? Major, I am sorry. I am from down south."
Q: "You are from down south?"
A: "Yeah."
Q: "OK. And are you married?"
A: "Yes I am."
India says it expects the immediate safe return of the pilot.
The video came hours after Pakistan's Prime Minister, Imran Khan, used a televised address to offer his Indian counterpart Narendra Modi talks about de-escalating tensions.
Mr Khan says war benefits neither nation.
"Considering the nature of the weapons that both of us have, can we afford any miscalculation? Should we not think at this moment, that if the situation escalates, then where it will go? It will not be in my control or your control. I will again tell you that better sense should prevail now and we should resolve our issues by sitting together and through talks."
India is defending its decision to strike pre-emptively inside Pakistan, saying it had intelligence Jaish-e-Mohammed was planning further attacks.
India's External Affairs Minister, Sushma Swaraj says Pakistan and all countries need to work together to stop extremism.
Hindi, then trans: "Terrorism is a threat to humanity. So the resolve of just these three countries cannot fight it. We need international resolve. We need global cooperation. So I am happy to tell you that in our joint communique, paragraph 10, we have decided on one hand to set up a UN-led global counter terrorism-mechanism, and on the other to finalise and adopt India's proposed CCIT, Comprehensive Convention on International Terrorism."
Citizens of India and Pakistan say the rising tension is palpable.
While some have taken to social media calling for military action, others are calling for peace using the hashtag #SayNoToWar.
Some Kashmir residents have begun fleeing their homes.
This man is leaving the town of Chakothi, near the line of control in Pakistan-held Kashmir.
Urdu, then trans: "We are helpless after the Indian army fired mortars last night, so we are evacuating the area. We suffered heavy losses and many people are injured."
The United States, Turkey, Germany, Britain and Australia are among those in the international community to say they've made contact with India and Pakistan to voice concern.
International relations experts, such as Dr Claude Rakisits ((RAK-uh-sits)), an Honorary Professor at the Australian National University, say it's important the international community keeps a close eye on proceedings.
"I'm sure the Americans have been talking to the Indians and the Pakistanis, and maybe the Saudi friends of Pakistan, or even to India. So I think there's a lot of telephone calls being made now as we speak, about 'look guys, please keep it cool'. This would be bad news to have an escalation, given both Pakistan and India are nuclear-armed."
Dr Claude Rakisits isn't surprised India is standing its ground, and says he doesn't expect it will stop doing so.
"Prime Minister Modi of India is going to have to go to an election within the next two months. His political base, basically what he stands for, is that he's tough on the Pakistanis -- so he has to be seen to be doing something."
