"The test launch was aimed at validating various design and technical parameters of the weapon system at maximum range," a military statement said.
Pakistani military leaders are trying to maintain a "credible deterrence" as arch rival India rapidly invests in military hardware.
In recent years, India has moved toward the creation of a missile defence system and is upgrading its air force and submarine fleet.
In 2012, it test-launched its first intercontinental ballistic missile, which it said had a range of more than 5000km.
India's growing defence budget is largely a result of its uneasy relationship with China. But it and Pakistan have fought three wars since 1947.
Nonproliferation experts say the Indian subcontinent remains a nuclear flash point.
Several Pakistani military analysts said the Shaheen-III had a range greater than that of any other Pakistani missile.
The maximum range of the earlier versions of the Shaheen missile was of about 2400km, which meant it could not reach parts of India's eastern frontier.
"Now, India doesn't have its safe havens any more," said retired Pakistan air force commander Shahid Latif.
"It's all a reaction to India, which has now gone even for tests of extra-regional missiles ... It sends a loud message: If you hurt us, we are going to hurt you back."
Some analysts say the range of the Shaheen-III could be less than Pakistani military leaders claim.
But yesterday's test could aggravate unease in parts of the Middle East, including Israel.
There also has been tension between Pakistan, which is overwhelmingly Sunni, and Shiite-dominated Iran.
But a strategic studies and nuclear expert at Quaid-i-Azam University in Islamabad, Mansoor Ahmed, said Pakistan's nuclear ambitions were focused solely on India.
India has a no-first-use policy on nuclear weapons but Pakistani leaders have repeatedly declined to adopt a similar stance, saying they might resort to nuclear weapons should India invade their country with conventional forces.
The Indian army is more than twice the size of Pakistan's and has a vast advantage in weaponry such as tanks, aircraft and artillery.
Ahmed said Pakistan's military was not interested in a "tit-for-tat" arms race with India. Instead, he said, Pakistan hoped to improve "existing capabilities", including new delivery systems for evading an Indian missile defence shield.
Ahmed said he suspected that Pakistani scientists and engineers were also working to equip the Shaheen-III with multiple warheads, which would make them harder to defend against.
Pakistan was also seeking to advance its cruise missile technology. The Shaheen-III could be fired from mobile launchers, making it easier to conceal and move around in the event of a nuclear exchange between India and Pakistan.
Subcontinent standoff
100 Analysts estimate that Pakistan and India have about 100 nuclear warheads each.
2735km Range of Pakistan's Shaheen-III ballistic missile.
5000km Range of India's most powerful missile.
