Indian Prime Minister Manmohan Singh said his government would arrange to bring Sarabjit Singh's remains home and for his last rites to be conducted in consultation with his family. The statement called it "'particularly regrettable" that Pakistan did not heed pleas to take a humanitarian view of the prisoner's case.
It's unclear how his death will affect the relationship between Pakistan and India. The nuclear-armed rivals have fought three major wars since they achieved independence from Britain in 1947. Relations have warmed somewhat in recent years, especially with regard to trade.
Sarabjit Singh was attacked Friday at a jail in the eastern city of Lahore and had been moved to a hospital for treatment.
His was arrested in 1990 after bombings in Lahore and Faisalabad that killed 14 people. He was convicted of spying and carrying out the bomb blasts, and the death sentence he received has been upheld in Pakistani superior courts.
His family, who visited him in Pakistan after he was attacked, maintained he was innocent.
They are in shock and demand that his body be brought from Pakistan and cremated with state honors, family friend Raj Kumar said in New Delhi.
Singh's wife Sukhpreet Kaur, two daughters and his sister had visited Singh in the Lahore hospital earlier this week and returned to India on Wednesday.
External Affairs Ministry spokesman Syed Akbaruddin said India was demanding a thorough investigation to identify who was responsible for the attack.
"This was simply the killing of an Indian citizen while in the custody of Pakistani authorities," the statement said. The attack "highlights the need for a concerted action by Pakistan to safeguard Indian prisoners in Pakistan."
Mukhtar Naqvi, a spokesman for main opposition Bharatiya Janata Party, accused the Indian government of not putting enough pressure on Pakistan earlier to seek the release of Singh from the Pakistani prison.
Former military ruler Pervez Musharraf rejected Singh's mercy petition in 2008, but he was never executed because the government that stepped down in March had an unofficial moratorium on executions.
Associated Press writer Ashok Sharma contributed to this report from New Delhi.