Azhar was recently released from detention
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The Pakistan government has banned the chief of a militant group from entering Pakistani-administered Kashmir.
Masood Azhar - head of the outlawed group, Jaish-e-Mohammad - had been invited to address a religious conference in the region on Thursday.
India accuses Jaish-e-Mohammad and Lashkar-e-Toiba of being involved in the attack on its parliament in 2001.
The announcement comes less than a week after the US Deputy Secretary of State Richard Armitage visited the region.
Pakistan says the ban on the militant leader has been implemented to maintain law and order in the region.
The two groups were declared as terrorist organisations by the United States and banned in Pakistan after the Delhi parliament attack.
Detention
Masood Azhar was due to address a conference to mark the birthday of the Prophet Mohammad on Thursday in the southern district of Kotli in Pakistan-administered Kashmir.
India accuses Pakistan of fomenting militancy in Kashmir
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He was due to visit the area for the first time since being released from one year's detention last December.
It is the first time the authorities have taken such action.
The former chief of the banned Laskar-e-Toiba, Hafiz Mohammad Sayeed, visited the territory three times following his release in November last year and addressed his followers.
The move has come as relations between India and Pakistan have improved following more than a year of tension which took the two countries to the brink of war.
Pakistani Prime Minister Zafarullah Khan Jamali and his Indian counterpart Atal Behari Vajpayee recently broke the deadlock and have decided to restore diplomatic ties and transport links.
Masood Azhar was freed from the Indian prison in exchange for passengers on a hijacked Indian Airlines jet in December 1999.