The Indian Government has named a senior diplomat, Shiv Shankar Menon, as its next high commissioner to Islamabad.
The two sides nearly went to war last year
It is another step towards the resumption of normal diplomatic relations - 17 months after high-level contacts were severed following an attack on the Indian parliament, blamed by India on Pakistan-backed militants.
Pakistan has accepted Mr Menon's nomination, official sources say.
The quest for peace is no crime. We may succeed or fail but we must keep trying
Atal Behari Vajpayee
Indian Prime Minister
The Indian announcement comes as the US Deputy Secretary of State Richard Armitage arrives in India, after talks with the Pakistani leadership on Thursday.
He is visiting South Asia, in what correspondents say is an attempt to nudge the two governments towards the negotiating table.
The nuclear neighbours recently announced a series of measures aimed at improving relations, particularly over Kashmir.
A career diplomat, Menon has worked in several key posts, including as high commissioner to Sri Lanka and, his current position, ambassador to Beijing.
Speaking after his talks with Pakistani leader Pervez Musharraf on Thursday, Mr Armitage said he was "optimistic" about relations between Islamabad and Delhi.
But India has turned down a proposal by Pakistan to get rid of its nuclear arsenal, and two events on Friday further threaten the uneasy detente:
India test-fired an air-to-air missile
Police and local news sources reported more violence in Kashmir, with Indian shelling over the Line of Control - reportedly leaving three boys dead.
Speaking after a debate in the Indian parliament, Prime Minister Atal Behari Vajpayee said on Thursday that India's nuclear programme was not just related to Pakistan.
"We are not just concerned about Pakistan. We are also concerned about others," he said.
"We don't want to use all our resources on buying arms and weapons. But we have to defend ourselves in case of a threat."
Mr Vajpayee however added that he was committed to the peace process.
"The quest for peace is no crime. We may succeed or fail but we must keep trying.
"I have told the Pakistani leaders that Indian and Pakistan have to live together."
Mr Armitage is expected to meet Indian leaders on Saturday.
Ahead of his visit, Kashmiri militants have called for a strike in Indian-administered Kashmir to protest against a US decision to put them on a list of terror groups.
The strike, called by the Hizbul Mujahideen, Jamiat-ul Mujahideen and Al-Badar groups, has shut down most shops and businesses in the Kashmiri capital, Srinagar, and other towns.
A spokesman for the Jamiat-ul Mujahideen says the decision to put Kashmiri militant groups on the list was a "ploy to impose an unjust solution of the Kashmir problem on the people of Kashmir".
The BBC's Altaf Hussain in Srinagar says the militants are concerned after the publication of a recent CIA map which appears to recognise the division of Kashmir into Indian and Pakistani territory.
The move to recognise the Kashmir ceasefire line - the Line of Contol - as an international border is one proposal put forward by some as a possible solution of the dispute.
But most Kashmiris do not recognise the Line of Control which they say divides their land.
During his Pakistan visit, Mr Armitage sought fresh assurances on the issue of the infiltration of Islamic militants into Indian-controlled Kashmir from Pakistan.
A group of Pakistani MPs has begun a goodwill visit to Delhi
"President Musharraf gave me absolute assurance that
there was nothing happening across the Line of Control and
that there are no camps in Azad Kashmir [Pakistan-administered Kashmir] and if there were any camps they would be gone tomorrow," Mr Armitage said.
On Friday, Indian Deputy Prime Minister LK Advani urged Pakistan to end infiltration and dismantle "terrorist training infrastructure".
"It is our appeal that you [Pakistan] stop the export of cross-border terrorism into Kashmir, stop giving the rebels arms, stop giving monetary help to the relatives of the militants and remove the telecommunications network used to send messages to the rebels in Kashmir," AFP quoted him as saying.
In a separate development 12 Pakistani MPs, who are on a goodwill visit to India as part of an unofficial peace initiative, met their Indian counterparts in Delhi.
The visiting politicians exchanged views at a breakfast hosted by Communist party MP Somnath Chatterjee and attended by MPs from across the Indian political spectrum.