India's leader made the remarks on Tuesday shortly before visiting Kargil, a remote area of Kashmir that was the scene of a deadly conflict between the nuclear-armed neighbors in 1999.
New Delhi has long accused Islamabad of using Pakistan-based militant groups such as the outlawed Lashkar-e-Taiba against its forces in the divided Himalayan territory -- a claim Islamabad denies.
Pakistan's foreign ministry said Modi was "repeating baseless rhetoric against Pakistan", in a statement released on Wednesday, and urged Delhi to adopt a more constructive approach.
"The press reports of Indian accusations, at the highest political level, are most unfortunate," the statement said, stressing Pakistan's desire for "good neighborly relations".
"It would be in the larger interest of the regional peace that instead of engaging in a blame game, the two countries should focus on resolving all issues through dialogue and work together to promote friendly and cooperative relations."
Kashmir is divided between India and Pakistan, which both claim the region in full but administer separate partial areas. The neighbors have fought two of their three wars over its control, AFP reported.
Fighting between Indian forces and rebel groups seeking independence for Kashmir or a merger of the territory with Pakistan has killed tens of thousands since 1989, mostly civilians.