Pakistan's national security adviser Sartaj Aziz was scheduled to visit New Delhi on Sunday for two-day talks with his Indian counterpart Ajit Doval.
India objected to his planned meeting with Indian Kashmiri separatist leaders on the margins of the official negotiations.
Both sides also exchanged barbs for two days over whether their talks should cover their dispute over the Himalayan region of Kashmir.
India insisted the dialogue, which was announced last month during a meeting in Russia between its Prime Minister Narendra Modi and Nawaz Sharif of Pakistan, had to be restricted to terrorism.
"If Sartaj Aziz decides to speak with the separatists before the NSA (national security advisers) meeting, there will be no talks," India's external affairs minister Sushma Swaraj told reporters Saturday.
In a statement later, Islamabad rejected what it called New Delhi's "preconditions" for the talks.
"The main purpose of any dialogue between India and Pakistan is to reduce tensions and restore trust as a first step toward normalization," the Pakistani foreign affairs ministry said.
"If the only purpose of NSA-level talks is to discuss terrorism, then instead of improving the prospects for peace, it will only intensify the blame game and further vitiate the atmosphere," it added.
Relations between India and Pakistan have strained over a series of cross-border firing incidents that both countries blamed on each other.
India has also alleged Pakistani militants were behind recent terror raids on its soil, which Islamabad denied.
Both countries have fought two of their three wars over Kashmir since independence from Britain in 1947, when the Asian subcontinent was divided into Islamic Pakistan and secular and Hindu-majority India.