The move follows the breakdown of months of talks over the Baghliar Dam in India's section of the divided Himalayan territory, which Pakistan says will block vital water supplies.

It is the first time Pakistan has sought mediation in a World Bank-brokered water-sharing treaty which it signed with India in 1960. The agreement has survived two wars between the South Asian foes.

India said Pakistan's action was unjustified. But Pakistani foreign ministry spokesman Masood Khan said New Delhi's recalcitrance could hinder the slow peace process between the two countries, which they began in January 2004.

"It is unfortunate that we had to go to the World Bank," he told a special briefing in Islamabad after a high-level meeting chaired by Prime Minister Shaukat Aziz took the decision.

"It is not a good omen. I must say it is casting a shadow over the composite dialogue."

The peace moves between New Delhi and Islamabad, known as the composite dialogue, have succeeded in bringing the two countries to their closest in years, but in recent months the process has crawled almost to a halt.

The core issue is the rancorous 57-year-old dispute over Kashmir, which is divided between India and Pakistan but claimed in full by both, but the two countries are split on other topics including the Baghliar Dam.

"We do not believe that a reference to the World Bank is justified," Indian foreign ministry spokesman Navtej Sarna told reporters in New Delhi.

"Our view has been that during detailed discussion there had been some convergence," Sarna added. "And we believe through further talks, further convergence can be promoted."

The water treaty bars India from interfering with the flow of the three rivers feeding Pakistan -- the Indus, the Chenab and the Jhelum -- but allows it to generate electricity from them.

Pakistan claims the dam could block water from the Chenab river and cut vital irrigation in its wheat-growing Punjab province. India says the fears are groundless.

Pakistan's Khan criticised India for continuing to work on the massive hydroelectric project while the row was still raging.

"They are responsible for the inordinate delay in the resolution of this dispute and they have been going ahead with the construction of the dam," he said.

However he expressed hope that an upcoming meeting between Aziz and his Indian counterpart Manmohan Singh on the sidelines of a regional conference in Dhaka next month could produce results.

Indian Foreign Minister Natwar Singh is also due to visit Islamabad in mid-February for talks with Pakistani leaders, Khan said.

India could still resolve the argument without the World Bank if it stopped work on the dam immediately, he added.

The dam in Indian-controlled Kashmir's Jammu region is being built in two 450-megawatt phases. The first phase was due for completion in 2004 but has been delayed by the dispute.

Analysts also warned the decision could hamper attempts to improve relations on the subcontinent.

"It will have negative implications for the already troubled India-Pakistan peace dialogue," political analyst Hasan Askari told AFP.

As well as Kashmir and various nuclear safeguards, the current peace talks have also dealt with key topics including drug trafficking, maritime issues, a Kashmir bus link and a second rail connection between the two countries.

India and Pakistan have fought three wars since independence from Britain in 1947, two of them over Kashmir. They came to the brink of nuclear war in 2002 after an attack on India's parliament, which New Delhi blamed on Pakistan-based militants.

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