The President of Pakistan, Pervez Musharraf, has offered to drop a 50-year-old demand for a referendum on the future of Kashmir and to meet India "halfway" in the search for a peaceful settlement.
Pakistan was prepared, he said, to be "bold and flexible" to resolve the conflict which has brought nuclear-armed India and Pakistan to war twice since 1947 and to the brink of war in 2002.
Pakistan has long held the position that a United Nations-supervised plebiscite should give the people of Indian-ruled Kashmir the right to decide whether their political future lies with India or Pakistan.
UN Security Council resolutions dating from the 1940s support that position but no vote has been organised because of India's objections.
But on Wednesday General Musharraf said: "We are for United Nations Security Council resolutions. However, now we have left that aside. If we want to resolve this issue, both sides need to talk to each other with flexibility, coming beyond stated positions, meeting halfway somewhere. We are prepared to rise to the occasion, India has to be flexible also."
Both sides are aiming to seize the agenda ahead of a summit of south Asian leaders early next month and Pakistan has recently made an effort to ward off growing international impatience.
Pakistan's offer throws the ball into the court of the Indian Prime Minister Atal Bihari Vajpayee, who will travel to Islamabad for the summit. But commentators saw the proposal as potentially clearing one of the biggest obstacles to a peaceful outcome.
India has not yet officially responded to the proposal. But J N Dixit, the former Indian foreign secretary and India's former envoy to Pakistan, said the President's offer marked an important shift. "We should be able to respond with flexibility and see if we can find a middle ground," said Mr Dixit.
General Musharraf warned India against failing to seize his offer. "The basis of everything, the basis of a reduction in militancy ... is moving forward on a process of dialogue. If that political dialogue doesn't come about, who wins and who loses? It is the moderates who lose and the extremists who win, and that is exactly what has been happening."
He also attacked India for taking advantage of a recent thaw in relations and a ceasefire to speed up construction of a fence along the Line of Control dividing Kashmir. The diplomatic thaw has restoredtransport links between India and Pakistan.
Mr Vajpayee's room for manoeuvre is limited with elections scheduled for next year. He is not even due to meet General Musharraf for talks at the regional summit but it is expected that the two leaders could meet informally.
General Musharraf said he would not beg for a meeting. "The ball is in his court. If he wants to meet me, I'll meet him. If he doesn't want to meet me, I am not that keen."Reuse content