A ceasefire has come into effect along the informal border dividing Indian- and Pakistani-administered Kashmir.
Flowers in Srinagar: Many Kashmiris are said to be sick of the violence
The two countries had earlier ordered troops to halt firing along the de facto border, or Line of Control (LoC), from midnight on Tuesday, local time.
Guns in the mountain region fell silent after India accepted a Pakistani offer of a truce, made on Sunday.
Regular firing along the border has killed hundreds in divided Kashmir - claimed by both India and Pakistan.
India accepted Pakistan's offer of a ceasefire along the LoC and said it would extend it to the disputed Siachen glacier area - the world's highest battlefield.
However, the Indian foreign ministry said the ceasefire could become durable only if Pakistan stopped allowing extremists into Indian-administered Kashmir.
Pakistan has always denied arming the 14-year-old uprising against Indian rule in Kashmir, saying it only lends diplomatic backing to an indigenous insurgency.
Spokesmen for the largest separatist groups have said they are not bound by the ceasefire and will continue their guerrilla war.
Hours before the start of the ceasefire, a clash near Jammu in Indian-administered Kashmir left two soldiers and two militants dead, police said.
The first night of the ceasefire was welcomed by villagers living along the LoC, who have long lived in fear of falling artillery shells.
Villagers stayed up late and left lights burning in their houses, while children played in exposed outdoor areas for the first time in years.
PM's peace speech
India's formal acceptance of the ceasefire came in a foreign ministry statement issued on Tuesday.
"The director generals of military operations of India and Pakistan.... agreed to observe a ceasefire with effect from midnight tonight along the international border, the Line of Control and [Siachen Glacier]," the statement said.
Pakistan welcomed the Indian move, saying it was time to move towards the "resolution of all differences... including the issue of Jammu and Kashmir".
The two sides exchange fire almost daily
The two sides did not start their ceasefires at the same time, however. India's midnight time is at 1830 GMT, 30 minutes earlier than when midnight strikes in Pakistan.
Pakistan's Prime Minister, Zafarullah Jamali, made the surprise truce offer on Sunday in a speech marking his first year in office.
He said the truce was timed to coincide with the Eid festival marking the end of the Muslim fasting month of Ramadan.
Other peace proposals put forward by Mr Jamali in Sunday's speech include:
- Accepting an Indian offer to set up a bus service linking Indian and Pakistani-administered parts of Kashmir
- Setting up a train service linking the two countries through the Thar desert
- Holding talks so that Indian and Pakistani prisons can release long-serving prisoners from each other's countries
- Agreeing to India's proposal for a ferry service between the ports of Bombay (Mumbai) and Karachi
- Allowing people aged over 65 to cross the border crossing at Wagah on foot
- Setting up another bus service between the Pakistani city of Lahore and Delhi.
Kashmir is claimed in its entirety by both countries and has been the cause of two of their three wars since independence from Britain in 1947.
For the last 14 years Kashmir separatists have staged an insurgency in the Indian-controlled part of the territory.
Civilians bear the brunt of artillery exchanges across the border
The armed forces of India and Pakistan exchange fire almost daily along the LoC, which was drawn up in 1971 and divides the disputed territory into two halves.
Civilians living near the border are routinely killed in the shelling, which both countries blame on each other's armies.
Last year, they massed hundreds of thousands of troops on the border following an attack on the Indian parliament, which India blamed on Islamic militants from Kashmir and Pakistani intelligence services.
The two sides have since restored full diplomatic ties and some transport links.
But India has rejected bilateral talks with Pakistan until attacks in the Indian-controlled part of Kashmir stop.