The US government has approved the sale of F-16 fighter jets to Pakistan, Bush administration officials say.
About 4,500 F-16s are in commission around the world
US President George W Bush called Indian Prime Minister Manmohan Singh to tell him about the decision.
Indian government spokesman Sanjay Baru said Mr Singh had expressed "great disappointment", saying the move would exacerbate India's security concerns.
The move marks a change in US policy, which blocked the sale in 1990 over Pakistan's nuclear weapons programme.
A US official denied the sale would affect the regional balance of power.
"[The F-16s] are vital to Pakistan's security as President Musharraf prosecutes the war on terror," the administration official said.
The official referred to President Musharraf's "strategic decision on 14 September, 2001, to stand with the United States", following the attacks in New York and Washington.
The BBC's James Coomarasamy in Washington says the US administration argues its new long-term commitment to Pakistan is consistent with the recommendations of the 9/11 Commission that investigated the attacks in the US.
But whatever the reasons for this change of US policy, our correspondent says, it was always bound to ruffle diplomatic feathers.
US officials later said the government had held out the eventual prospect of India also acquiring F-16s.
India is contemplating a "very large" purchase of fighter jets, a state department official said.
The Bush administration will "respond positively to the current Indian request," which would require congressional approval, the official told the Associated Press news agency.
Pakistan struck a deal with the US for the fighter planes in the late 1980s, but Washington blocked the sale in 1990 as a sanction against Pakistan's nuclear weapons programme.
The revived sale will form part of a five-year, $3bn assistance programme.
Another senior US official told AFP news agency that the F-16 numbers would be "relatively small" but there would be "no set limit on what the United States is going to be willing to sell to Pakistan".
Armed forces manpower - India 1,325,000, Pakistan 620,000
Combat aircraft - India 744, Pakistan 744
Nuclear missiles (estimates as at 2002) - India 60, Pakistan 25
Surface warships - India 29, Pakistan 8
Submarines - India 19, Pakistan 10
Military expenditure (2002) - India $13.8bn, Pakistan $2.7bn
Source FAS. Figures refer to 2004 except where indicated
Pakistani Information Minister Sheikh Ahmed Rashid welcomed the deal, which he said showed "the good relations between Pakistan and the United States".
Correspondents say that the Indian government fears the arms deal will disturb the military balance between the long-time rivals and affect the current peace dialogue.
Condoleezza Rice discussed F-16s on her recent India trip
India and Pakistan have fought three wars since independence in 1947, two of them over the disputed region of Kashmir.
The nations came to the brink of another war in 2002 but are now engaged in a two-year thaw that has seen improved relations.
The F-16 is built by Lockheed Martin and is one of the world's most successful fighter aircraft.
About 4,500 are in commission with air forces around the world.