Islamabad called the bloodshed in one of its tribal areas a "grave infringement" of Pakistan sovereignty and cut off Nato's supply route to Afghanistan.
A Nato spokesman said it was likely coalition airstrikes caused the Pakistani casualties, the deadliest friendly fire incident by Nato since the war against Afghanistan began, but an investigation was under way to determine the details.
Nato jets and helicopters were said to be pursuing militants on the Afghanistan-Pakistan border when they opened fire and hit the Pakistani soldiers asleep at posts in the Mohmand tribal agency.
In retaliation, Pakistan rapidly choked off Nato supply routes through the Khyber Pass and the Chaman border in the southwestern province of Baluchistan. Nato relies on these routes for up to half of its non-lethal supplies.
Arrangements between Pakistan and Nato were being reviewed after an extraordinary meeting of Pakistan's senior ministers and military chiefs. One report said the US had been given 15 days to leave the Shamsi airbase.
In the past year, the two allies have repeatedly clashed over intelligence, the Afghan insurgency and the raid that ended in Osama bin Laden's death.
After the emergency Cabinet meeting, Pakistan's Prime Minister, Yousaf Raza Gilani, said: "This is an attack on Pakistan's sovereignty". General Ashfaq Pervez Kiyani, the powerful army chief, also strongly criticised the attack.
He called for "all necessary steps to be undertaken for an effective response to this irresponsible act".
"A strong protest," he said, "has been launched with Nato/ISAF [Western forces in Afghanistan] in which it has been demanded that strong and urgent action be taken against those responsible."
Pakistan has occasionally choked supply lines as a symbolic protest , but it has always reopened them within days; Western officials say supplies have not been badly disrupted.
It is unclear how or why the attack happened. Brigadier General Carsten Jacobson, a Nato spokesman, said its forces were operating close to the border in eastern Afghanistan's Kunar province against militants. Close air support was called in, which probably caused the casualties, he said.
The military border posts had recently been established by the Pakistan army to stem the flow of Pakistani Taleban militants returning to Pakistan to mount attacks on the territory they once controlled.
Since the Pakistan army launched sweeping military offensives in the Swat Valley and other parts of Pakistan's northwest, the Pakistani Taleban militants have taken sanctuary on the east bank of the Kunar River in Afghanistan. Pakistani military officials say that hundreds of such militants mount raids from there.
The new crisis underscores the fragility of the Afghanistan-Pakistan border, also known as the Durand Line. The long, porous border in mountainous territory has been ill-policed since it was first drawn up in colonial times.
In recent months, tensions have risen on both sides of the border as the US blamed Pakistan for backing the Haqqani network and other pro-Taleban Afghan insurgents, who mount cross-border attacks from sanctuaries in Pakistan's tribal areas.
Pakistan is likely to seize on this moment and use it as leverage to argue against claims that it is not doing enough to crack down on terrorists on its soil. Washington's attempts to win greater Pakistani co-operation in bringing the conflict in Afghanistan to an end may suffer temporarily, too.
But officials and analysts said that there are very real limits to Pakistani outrage. They expect Nato supplies to flow once again after the attack has been investigated and apologies have been accepted.
Border routes
1) Across the Khyber Pass to the town of Torkham and on to Kabul.
2) Through Baluchistan province to the town of Chaman and on to Kandahar.
- A third of all cargo that the Nato-led ISAF sends into Afghanistan travels this way.
- A third goes on routes through Central Asia, and the Caucasus or Russia.
- The rest is flown in.
Independent, AP