The Indian Government says it is restoring the right of Pakistani civilian aircraft to fly over India to third countries with immediate effect.
The conciliatory move comes after intense diplomatic pressure on the nuclear rivals aimed at bringing them back from the brink of war.
The Indian Foreign Ministry said the restrictions were being lifted in response to a reduction in the infiltration of Islamic militants from Pakistani territory.
A Pakistani Foreign Ministry spokesman welcomed the move as a step in the right direction, but said "a lot more needs to be done".
