* India announced 'surgical strikes' on Thursday
* Pakistani PM rejects Indian version of events
* Thousands of villagers evacuated in India
Pakistan on Friday "completely rejected" India's claim to have sent troops across its disputed border in Kashmir to kill suspected militants, as India evacuated villages near the frontier amid concerns about a military escalation.
In a rare public announcement of such a raid, India on Thursday said it had carried out "surgical strikes", sending special forces to kill men preparing to sneak into its territory and attack major cities.
Indian officials said troops had killed militants numbering in the double digits and that its soldiers had returned safely to base before dawn, but declined to provide more evidence about the operation.
Pakistani Prime Minister Nawaz Sharif maintained that India fired from its side of the heavily militarised frontier in the disputed region of Kashmir and killed two soldiers.
"The Cabinet joined the Prime Minister in completely rejecting the Indian claims of carrying out 'surgical strikes'," Sharif's office said in a statement.
Domestic pressure had been building on Indian Prime Minister Narendra Modi to retaliate after 19 soldiers were killed in a September 18 attack on an Indian army base in Kashmir that India blames on infiltrators who crossed from Pakistani territory.
A senior leader of Modi's ruling party declared himself satisfied with India's "multi-pronged" response to the attack on the army base.
"For Pakistan, terrorism has come as a cheaper option all these years. Time to make it costly for it," Ram Madhav, national general secretary of the Bharatiya Janata Party, wrote in a column for the Indian Express newspaper.
While India's public and politicians have welcomed the operation, Pakistan greeted New Delhi's version of events with scepticism and ridicule.
Television news channels and newspapers reported only small arms and mortar fire, a relatively routine occurrence on the de facto border.
Pakistan's Express Tribune, an affiliate of the New York Times, led its edition with the headline "'Surgical' farce blows up in India's face".
India's announcement on Thursday has raised the possibility of military escalation between the rivals that could wreck a 2003 Kashmir ceasefire.
India evacuated more than 10,000 villagers living near the border, and ordered security forces to upgrade surveillance along the frontier in Jammu and Kashmir state, part of the 3,300-km frontier.
Hundreds of villages were being cleared along a 15 km strip in the lowland region of Jammu and further north in the mountains of Kashmir.
"Our top priority is to move women and children to government buildings, guest houses and marriage halls," said Nirmal Singh, deputy chief minister of Jammu and Kashmir.
"People who have not been able to migrate were instructed not to venture out of their houses early in the morning or late in the night."
Modi's government has been struggling to contain protests on the streets of Kashmir where more than 80 civilians have been killed and thousands wounded in the last 10 weeks after a young separatist militant was killed by Indian forces.
Pakistan said on Friday that Sharif's special envoys had arrived in Beijing to brief China on the deteriorating situation in Indian-controlled Kashmir. China, a Pakistan ally, expressed its concern, Pakistan's foreign ministry said in a statement.
Farmer Rakesh Singh, 56, who lives in the Arnia sector of Jammu, said his family were among the first to leave home because his village was within range of Pakistan's artillery.
"We suffer the most," he said. "It is nothing new for us."
People gather around the coffin of a Pakistani soldier, killed along the Pakistan-India border in Kashmir, during his funeral in Faisalabad on Thursday.