NEW DELHI, India ? India expelled Pakistan’s ambassador Saturday as firing between the two nuclear-armed neighbors escalated in the disputed Kashmir region, forcing thousands of villagers to flee.

The diplomatic move was announced after Prime Minister Atal Bihari Vajpayee met Saturday with top Cabinet ministers, military and intelligence chiefs to decide India’s response to a militant attack in Kashmir that killed 34 people earlier this week. The Himalayan region has been at the root of two of the three wars fought by India and Pakistan.

The decision to expel the ambassador was considered a signal New Delhi still hopes to solve the dispute through diplomatic means, rather than a military response.

India withdrew its ambassador from Pakistan in December, after a militant attack on the Parliament in New Delhi. As tensions rose, both countries slashed their diplomatic staffs, halted overflight rights for airplanes and ended train service.

Pakistan’s ambassador had remained in New Delhi, although the Indian government refused to meet with him. India’s External Affairs Minister Jaswant Singh said Saturday that since New Delhi no longer had an ambassador in Islamabad, the Pakistani ambassador would have to leave.

The Pakistan Foreign Ministry said the government “noted with disappointment” India’s decision to expel Ashraf Jehangir Qazi and had recalled him.

“The government of Pakistan will continue to work for the deescalation of tension between Pakistan and India and for the complete normalization of diplomatic relations between the two countries,” the statement said.

Vajpayee vowed in Parliament earlier this week that he would take action after Tuesday’s militant attack in Kashmir, which killed 34 people at an army base, most of them the wives and children of soldiers. India blames Pakistan for the assault, and many lawmakers have called for military action.

On Friday, a bomb left on a motor scooter exploded in a busy shopping area in Srinagar, the summer capital of Jammu-Kashmir state, killing two people and injuring 17 others, police said.

In Kashmir, intense firing increased overnight, with both sides using mortars and recoilless guns. Whole villages were abandoned as residents fled; in some places, the carcasses of farm animals brought down by the exchange of fire lay rotting in the summer heat, their stench mixing with the smell of used ammunition.

“It’s a war,” said Bishamber Dass, one of 10,000 people who fled their homes by the light of exploding shells Friday night. “The boom of the guns could be heard even at the distance of five kilometers (three miles) from the border,” said Dass, who found shelter in a makeshift migrant camp Saturday.

Firing was particularly heavy in the Hiranagar and Samba areas, where Indian troops advanced into Pakistani territory during their 1965 and 1971 wars.

Indian military officials in the region said four soldiers had been wounded, while three civilians were killed and seven wounded in the most intense cross-border firing this year.

Pakistan’s government-run television reported four civilians were killed and 40 wounded by the Indian shelling.

Reports from local military officers, villagers and journalists on the border conflicted with statements made in New Delhi by the Defense Ministry and the army.

“So far there is no major firing,” Defense Ministry spokesman P.K. Bandopadhyay told The Associated Press on Saturday.

“There is intermittent firing with infantry weapons. But there is no escalation,” said Indian Army spokesman Col. Shruti Kant.

Indian and Pakistani soldiers, rivals since a bloody partition divided the subcontinent upon its independence from Britain in 1947, routinely fire at each other across the frontier.

Hundreds of thousands of troops, along with tanks and heavy guns, have been massed at the border since December, however, after a militant attack on India’s Parliament left 14 people dead, including the five attackers.

Vajpayee wrote to President Bush at the time, saying India’s patience was wearing out, and there have been fears that another major militant attack might provoke a cross-frontier strike by Indian forces.

The government says the attacks were carried out by Islamic groups based in Pakistan and backed by Pakistan’s intelligence agency.

Pakistan denies the allegations, but says it supports the goals of the militants fighting in India’s portion of divided Kashmir. Since 1989 they have fought for the region’s independence from India or merger with Pakistan in an insurgency that has killed more than 60,000 people, human rights groups and Jammu-Kashmir officials say.

In Washington, a U.S. official said Friday that Richard Armitage, the State Department’s No. 2 official, may travel to India and Pakistan this month to try to ease the tension.

Christina Rocca, the U.S. assistant secretary of state for South Asia, visited the region during the past week, arriving a few hours after the attack on the army base. Secretary of State Colin Powell has spoken to leaders of both countries by telephone in recent days.