"Kashmir is a flashpoint and can trigger a fourth war between the two nuclear powers at anytime," Dawn quoted Sharif as saying Tuesday in his address to the budget session of the Azad Jammu and Kashmir (AJK) Council in Muzaffarabad.
Sharif said he has been vigorously highlighting the Kashmir issue at the global level, and has presented the "just stand of Kashmiri people" at all international forums, including the UN General Assembly.
"Kashmir also remained under focus during my meeting with US President Barack Obama," he said.
Sharif said Pakistan did not want to indulge in an arms race and would implement the ceasefire along the Line of Control (LoC).
He said the development and prosperity of the Pakistan-administered Kashmir was his priority, and announced a number of ambitious plans.
"I have a heartfelt attachment with Kashmir. It's as much important for me as other parts of the country and that's why I consider its development and prosperity my national duty," Dawn quoted him as saying.
The prime minister said the region's capital Muzaffarabad would be linked with Rawalpindi and Islamabad through a modern railway system.
It would also be connected with other major cities of Pakistan through a network of highways for revival of tourism in the region.
Sharif said a state-of-the-art road from Muzaffarabad to Taobutt in Neelum Valley and a tunnel in Leepa Valley to keep it connected with the region throughout the year would also be constructed.
Airports of international standard would be built in Muzaffarabad and Rawalakot, he said.
Sharif stressed the need for launching hydroelectric projects in the region and said it would not only provide cheap electricity but also reduce poverty and unemployment.
It was for the first time that the council was held in Muzaffarabad, where its Rs.14.98 billion budget for the current fiscal year was approved.
Pakistan-administered Kashmir's President Sardar Yaqoob Khan, Prime Minister Chaudhry Abdul Majeed and some ministers participated in the meeting, Dawn said.