Addressing the North Atlantic Council, the principal decision-making body of NATO, in Brussels, Gilani said Pakistan desires "good neighbourly and cooperative relations" with India.
He said Pakistan has suggested to India that the Joint Anti-Terrorism Mechanism be reactivated.
"Our two countries have no option but to resolve peacefully all outstanding disputes including Kashmir, Siachen and water," he said.
"Dialogue, I believe, offers the only way forward. We need to get back to a serious, sustained and result-oriented engagement," he remarked.
The two countries "must also work closely" on eliminating terrorism and forging closer economic and trade relations, he said.
Gilani noted that he had a "good meeting" with his Indian counterpart Manmohan Singh on the sidelines of a SAARC summit in Bhutan in April and that they had "agreed to resume our dialogue process".
However, Gilani also said that his country continues to have concerns about "Pakistan-specific Indian military doctrines such as the Cold Start envisaging a limited conventional war under the nuclear over-hang" and a "huge increase in the Indian military budget and massive weapon acquisitions".
"These together with discriminatory policies, especially in the nuclear and technological arena, have accentuated the regional imbalance in South Asia," he said.
Pakistan believes that "all these and other issues between Pakistan and India must be resolved peacefully through dialogue", he added.
Gilani noted that Pakistan-India relations have a "significant bearing" on South Asian security and said: "Unfortunately, long-outstanding disputes such as Jammu and Kashmir, Siachen and Sir Creek continue to fester and require a just and peaceful resolution."
He also pointed out that the region is "water stressed" and that water issues "have started to impact on Pakistan's agriculture and the well being of our people" as the country is a lower riparian state.
Such issues of peace, security and strategic stability need to be addressed in a "forthright manner", he said.