Militants have launched a raid in Indian-controlled Kashmir on a building holding passengers for Thursday's landmark cross-Kashmir bus service.
The passengers were safely evacuated
The building in Srinagar was set on fire but police say the passengers were evacuated and that both militant attackers were shot dead.
The raid came amid final preparations for the first bus service across divided Kashmir in nearly 60 years.
Both Pakistan and India have vowed the service will go ahead.
Militants fighting Indian rule have pledged to disrupt it.
The BBC's Nick Bryant was near the centre in Srinagar soon after the firing started at around 1530 local time (1000GMT).
He said flames quickly engulfed the roof, with choking, black smoke billowing into the sky.
Soldiers and civilians take cover during the Srinagar raid
People trapped in the buildings hurled themselves through windows to escape the blaze.
Our correspondent, Navdip Dhariwal, also in Srinagar, says the siege is now over and the buildings appear razed to the ground.
Thirty to 40 people have been taken to hospital after what is being seen as a glaring security lapse, she says.
Four militant groups, Al-Nasirin, the Save Kashmir Movement, Al-Arifin and Farzandan-e-Millat, have said they carried out the attack.
Pakistan's Foreign Minister Khurshid Mohammad Kasuri said: "Pakistan strongly condemns anyone attacking innocent people. What is their crime? Their only wish is to meet with relatives. They are not politicians."
Pakistan's Minister for Kashmir Affairs, Faisal Saleh Hayyat, said: "So far the bus is on. It will not stop. The peace process between Pakistan and India will not stop."
India also pledged to press on with the bus service.
Premier Manmohan Singh, who is scheduled to flag off the Srinagar bus, told Indian television: "These are desperate responses by those who don't want the [peace] dialogue to go ahead. We will not allow them to derail the dialogue and the peace process."
Some passengers have also vowed to continue with their journey.
One Pakistani passenger, Abida Masudi, said she had waited 20 years for the opportunity to travel and was undeterred.
"No one lives forever. If I am destined to die like this, so be it."
The bus services are scheduled to leave Muzaffarabad in Pakistan-controlled Kashmir at 1100 local time (0600GMT) and Srinagar at 1100 local time (0530GMT) on Thursday.
The Pakistani bus leaves Muzaffarabad at 0400GMT Thursday
They will each carry about 30 passengers on the 170km (105 mile) route between the cities.
The buses will drive to Kaman Point on the Line of Control that divides Kashmir, where the passengers will disembark from their bus, cross the line and board the vehicle on the other side.
Patrols along the route are checking all vehicles for weapons.
Hundreds of people with suspected links to militants have been arrested in Indian-controlled Kashmir.
On Wednesday, suspected militants shot dead an official of the ruling Peoples Democratic Party, Ghulam Rasool, in India's Jammu and Kashmir.
Although militants insist they are not opposed to the reunion of divided families, they have accused Pakistan of a climb-down in allowing the bus service, which they say undermines their campaign against Indian rule.