On December 3, Pakistan announced that its armed forces along Kashmir's Line of Control (LoC) would immediately "observe maximum restraint in order to strengthen and stabilize the cease-fire." This was in response to an unprecedented Indian cease-fire against Kashmiri militants, which took effect on November 27. India says there has been a "recognizable reduction" in firing across the LoC, but by December 6, Indian troops had killed twelve suspected guerillas trying to cross the LoC, arguing that the cease-fire did not extend to infiltrators. Even as each side wondered about the motivations of the other, these developments have engendered cautious optimism about peace prospects in nuclear-armed South Asia, while demonstrating the many hurdles ahead.

New Delhi ordered a unilateral, but temporary, cease-fire against the insurgents during Ramadan, the Muslim month of fasting. Prime Minister Vajpayee has indicated a willingness to extend the cease-fire. This is the first time since the Pakistani-backed insurgency began in 1989 that India has ceased pro-active military action in Kashmir.

After initially dismissing New Delhi's gesture as a ploy, Pakistan followed up the announcement of its cease-fire along the LoC with a December 4 statement that it would not object to bilateral talks between New Delhi and the largest umbrella organization of Kashmiri militants, the All Parties Hurriyat Conference (APHC), provided "tripartite talks" involving Pakistan begin the next stage of negotiations immediately after Ramadan. This is a subtle, but significant, shift away from Pakistan's previous opposition to any talks between New Delhi and the Kashmir militants that did not involve Islamabad. Later Pakistan's Foreign Minister, Abdul Sattar, told CNN that he would like "tripartite talks" to begin before the end of Ramadan, on December 27.

Officially, India has rejected the idea saying, "It is abundantly clear that there is no room" for "tripartite talks." After the Kargil confrontation in the summer of 1999, India has refused to resume negotiations with Islamabad, citing continued "cross-border terrorism" as an obstacle. A formula facilitating indirect negotiations that could conceivably cool the Kashmir flash point, however, would be difficult to dismiss outright. Pakistan has said it would invite the APHC to facilitate "parallel talks" through separate discussions with New Delhi and Islamabad. Already some Indian opposition members have welcomed Pakistan's offer, saying it should be viewed "with an unprejudiced mind," and that the opportunity for "parallel talks" with Pakistan "at some level" should not be lost.

The Indian government has reacted cautiously to Pakistan offer, with Prime Minister Vajpayee, saying it was "good but not substantive." Earlier, the defense minister said if Pakistan "genuinely" stops all firing across the border and stops the "influx of terrorists," it would lead in a direction that would "enable us to perhaps sit and talk."

Many militant groups in Kashmir have dismissed India's gesture, and have continued their attacks on civilians. The first day of the cease-fire saw twelve civilians killed by militants trying to make a point. The international community, including the United States and Russia, has welcomed New Delhi's decision. The U.S. State Department urged those groups who had rejected the cease-fire to "reconsider their positions and to use this opportunity to begin a process" to end the conflict in Kashmir.

In the summer, hopes for peace in the Kashmir Valley were raised when Hizbul Mujahideen, a powerful rebel group in Kashmir, offered a cease-fire to which New Delhi responded positively. However, the cease-fire was short-lived, as the Hizbul added on a pre-condition that Pakistan should be included immediately in talks. New Delhi refused and the violence resumed.