A Pakistan foreign ministry statement said the move would begin shortly, after describing India's decision as "a step in the right direction".
On Wednesday India announced it would partially pull back troops from its border with Pakistan, although it would keep them deployed in Kashmir.
It was seen as the most significant breakthrough in easing a stand-off between the countries in almost a year.
Pakistan responds
Islamabad's decision to pull back its troops was made after a high-level meeting chaired by President Pervez Musharraf, according to reports.
The forces would be moved to "peace-time locations", the foreign ministry said.
India has been under international pressure to take steps to reduce tension with Pakistan.
The United States and the European Union urged Delhi to begin talks with Islamabad now that crucial elections have taken place in Pakistan and Kashmir.
Kashmir
The number of troops to be withdrawn by India is not yet known - reports say formal orders are expected to be issued on Thursday.
Troops will "redeploy from positions on the international border with Pakistan, without impairing their capacity to respond decisively to any emergency," Defence Minister George Fernandes announced on Wednesday.
"There will be no lowering of vigil in Jammu and Kashmir," he added.
Mr Fernandes also ruled out any talks with Pakistan in the immediate future.
Troops had been deployed in Kashmir to stop infiltration by militants from Pakistani-administered Kashmir, something which Islamabad says it can do little to stop completely.
Costly deployment
But other reasons have influenced the decision.
Troop morale is said to have become very low in some places among soldiers who have spent month after month on a state of alert in often inhospitable conditions.
Also, maintaining an army of 750,000 on the front line has been very expensive.
Reports quote senior officials as saying that the news of redeployment has been welcomed by the soldiers, as it coincides with the Hindu festival season.
"The soldiers in the bunkers are particularly happy. People had forgotten them all through the long summer," one officer told Reuters.
Last May India pulled back warships from forward positions in the Arabian Sea, and later lifted a ban on Pakistani aircraft using Indian airspace.