"Pakistan rejects the allegations carried by some sections of the Indian media of an attack across the LoC in the Poonch sector in which five Indian soldiers were claimed to have been killed. These are baseless and unfounded allegations," Foreign Office spokesman Aizaz Chaudhry said.
"Our military authorities have confirmed that there had been no exchange of fire that could have resulted in such an incident," he said in a statement.
Islamabad further called for "abiding by and strengthening existing military mechanisms to ensure that such ill-founded reports that have the potential of vitiating the atmosphere, are avoided".
Earlier, a Pakistani military official told PTI: "No such incident has taken place on LoC as there was no violation of the ceasefire by our troops."
Indian Defence Minister A K Antony told parliament an army patrol was ambushed by "approximately 20 heavily-armed terrorists along with persons dressed in Pakistan Army uniform".
Antony said the Indian Army is "fully ready to take all necessary steps to uphold the sanctity of LoC".
The Foreign Office spokesman said Pakistan is "committed to a constructive, sustained and result-oriented process of engagement with India and looks forward to an early resumption of the dialogue process".
"It is important that both sides make serious efforts in maintaining the positive atmosphere and avoid negative propaganda," he said.
India and Pakistan put in place a ceasefire along the frontiers in Jammu and Kashmir, including the LoC, in late 2003.
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