"We want peaceful resolution of Kashmir with our full sincerity so that by removing this main source of tension, Pakistan and India could find new ways for promoting their relations," he said while addressing the Independence Day parade after midnight here.
It was the first time that wee hours parade at the start of the Independence day has been held in the capital.
Sharif's remarks come close on the heels of a spat between the two countries over Prime Minister Narendra Modi's speech accusing Pakistan of continuing to engage in a proxy war of terrorism against India.
Pakistan had dubbed Modi's comments as "baseless rhetoric" and "unfortunate".
India has also voiced serious concerns over ceasefire violations by Pakistan along the Line of Control in recent weeks.
In his address, Sharif said promotion of peaceful relations with neighbours is the cardinal principle of his foreign policy.
"We are a peaceful country. We are striving for peace within the country and also want durable peace on our borders," he said.
The three services chiefs, ministers, diplomats, senior officials and business leaders were present at the ceremony held in the Parliament premises.
Sharif has stated that he wants better ties with all neighbours and recently regretted not having good relations with India.
Traditional military parade are held on March 23 but it was discontinued some years ago due to deteriorating law and order situation in the country.
Later, the then army chief Gen Ashfaq Parvez Kayani introduced a separate parade event which he held every year after midnight at the start of August 14 at Pakistan Military Academy Kakul near Abbotabad in Khyber Pakhtunhwa province.
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