Pakistan says it has shot down two Indian military jets and captured two pilots in a major escalation between the nuclear powers over Kashmir.
India says it lost one MiG21 fighter and a pilot was missing in action.
Pakistani PM Imran Khan said the two sides could not afford a miscalculation with the weapons they had.
India and Pakistan – both nuclear-armed states – claim all of Kashmir, but control only parts of it.
They have fought three wars since independence from Britain and partition in 1947. All but one were over Kashmir.
They follow a militant attack in Kashmir which killed 40 Indian troops – the deadliest to take place during a three-decade insurgency against Indian rule in Kashmir. A Pakistan-based group said it carried out the attack.
Pakistan’s information ministry tweeted a video purporting to show a captured Indian pilot
The BBC’s Soutik Biswas, in Delhi, says the challenge for India and Pakistan now is to contain the latest escalation before things get completely out of control.
Pakistan’s information ministry published but subsequently deleted a video purporting to show one of the Indian pilots that the Pakistani military says it has captured.
In the video, the pilot – who is blindfolded and appears to have blood on his face – identifies himself as Wing-Commander Abhinandan.
The ministry also tweeted what it said was footage of one of the downed Indian jets.
He also said that an Indian plane had shot down a Pakistani fighter jet and Indian ground forces observed it falling on the Pakistani side of the LoC. Pakistan has denied any of its jets had been hit.
In a televised address, Prime Minister Khan offered India talks over terrorism and warned against further escalation.
“If we let it happen, it will remain neither in my nor Narendra Modi’s control,” he said.
“Our action is just to let them know that just like they intruded into our territory, we are also capable of going into their territory,” he added.
Mr Modi has not yet made any comment, but Indian Foreign Minister Sushma Swaraj said her country would act “with responsibility and restraint”.
“India does not wish to see further escalation of the situation,” she said, speaking from a meeting with Russian and Chinese foreign ministers in China.