Pakistani Prime Minister Imran Khan has said his government would give provisional provincial status to Gilgit-Baltistan, the northern part of the larger Kashmir region.
"We have made a decision to grant provisional provincial status to Gilgit-Baltistan, which has long been the demand here," Khan said in a speech in the city of Gilgit on Sunday.
Khan went onto say that the decision was within the scope of a United Nations Security Council (UNSC) resolution.
The Pakistani premier gave no time-frame for its implementation.
Law experts say such a move would require a constitutional amendment in Pakistan, which must be passed by two-thirds of Pakistan's parliament.
The proposal appears likely to bring the region closer to the status of Pakistan's other federating provinces.
Similar plans by consecutive Pakistani governments to adjust its status were previously shelved over concerns that it would adversely impact Islamabad's case in the United Nations for full control over the entire Muslim-majority Himalayan region.
Khan’s latest proposal drew condemnation from India, which has long objected to any such changes by Islamabad.
Indian Foreign Ministry spokesman Shri Anurag Srivastava said on Sunday that New Delhi "firmly rejects the attempt by Pakistan to bring material changes to a part of Indian territory, under its illegal and forcible occupation."
Strategically-located Gilgit-Baltistan, with an estimated population of 1.2 million, borders Afghanistan and China. India's Foreign Ministry has already objected to the election in the region, saying Pakistan illegally occupies the territory.
The move comes months after Indian Prime Minister Narendra Modi’s Hindu-nationalist government decision to abolish the disputed Himalayan region’s autonomous status. Last year India angered Pakistan by announcing changes to the status of Kashmir, taking away some of the region's privileges.
Although Pakistani officials made no link between India's prior move and Khan's proposals, the Pakistani action is likely to be viewed in both countries as a partial tit-for-tat response.
Since Modi’s government stripped Kashmir of its constitutional autonomous status more than a year ago, New Delhi has unilaterally introduced a slew of laws that locals say are aimed at shifting the region’s demographics and economically disempowering local residents.
The India's ruling Bharatiya Janata Party (BJP) has denied that the new laws are an attempt to change the demography of the region.
Kashmir is a bone of contention between arch rivals India and Pakistan.
Kashmir has been split between India and Pakistan since partition in 1947. Both countries claim all of Kashmir and have fought three wars over the territory.
UN observers are still stationed in the region. Kashmir has carried a vague constitutional status in both countries since 1947 to accommodate for a UNSC resolution on the dispute