Pakistan has released more than 500 Indian detainees who were allowed to walk home across the Wagah Border west of the Indian Punjab city of Amritsar.
The formalities for the exchange were speedily completed
The prisoners - mostly fishermen - were freed by order of President Pervez Musharraf as a "goodwill gesture", a local Pakistani official said.
Indian officials say it is one of the largest prisoner transfers to be arranged between the two countries.
The releases follow numerous measures by both countries to improve relations.
"This is the first time that prisoners in such a large number have been handed over to us by Pakistan," Balvinder Hampal, an Indian embassy official at Wagah, told the Associated Press.
"Such steps will certainly help promote the peace process between the two countries."
The law minister of the Pakistani province of Punjab, Raja Basharat, told the BBC's Shahid Malik that Pakistan expected India to "reciprocate the gesture" by sending back Pakistani internees kept in the Indian jails.
Indian officials in Islamabad told the BBC that all the legal formalities for the transfer had been completed in one day, which is a record.
The Wagah Border is the only official road crossing between India and Pakistan, and relatives of the Indian prisoners anxiously looked on to identify their loved ones while officials completed paperwork to finalise their repatriation.
Fishermen from the two countries are often held
Many families camped outside the border check post for several days after rumours of their release were published in Indian newspapers.
Among them was the family of Santa Singh - a Sikh who had been jailed in Pakistan as far back as in 1969.
Also standing in the crowd were relatives of Sarabjit Singh, who was sentenced to death after being mistakenly identified as an outlaw by Pakistani authorities.
Most of those released on Tuesday were fishermen from the western Indian state of Gujarat, arrested by Pakistani coastal authorities for allegedly operating in Pakistani waters.
While those prisoners not fishermen were speedily re-united with their families, the 528 fishermen will have to wait for another two days.
The state government of Indian Punjab has made special arrangements to transport them to Delhi from where they will all board trains bound for their homes in coastal Gujarat.
The BBC's Asit Jolly in Chandigarh - Punjab's capital - says that 36 people freed were travellers duped by unscrupulous agents who had promised illegal passage to Western nations.
Instead, they were deported to Pakistan from countries like Iran and Turkey, our correspondent says. Some spent many years in jail in Pakistan.
Indian Punjab's chief minister, Amrinder Singh, travelled to the Indian side of the border to receive them.
He had visited Pakistan last week and appealed to President Musharraf for the prisoners to be released.
The released prisoners were, he said, "ordinary people and not criminals".
He said that he had already issued orders to identify Pakistani nationals who had similarly been jailed in the Indian Punjab and promised "to work for their early repatriation".