Militant groups banned in Pakistan are expanding operations and recruitment in Pakistani-run Kashmir, according to a government report seen by the BBC.
The observations are from a detailed secret report submitted to the region's government on the groups' activities in the city of Muzaffarabad and elsewhere.
Pakistan banned the groups in 2002 after an attack on India's parliament brought the two states close to war.
A senior Pakistani minister denied that such a report had been submitted.
"No such report has come before the government which shows that these organisations have revived their activities," Qamaruzaman Qaira, Pakistan's Information Minister, told the BBC.
"However, if the report was submitted by a secret agency then that is another matter altogether," he said.
Pakistan's allies, including the US, have expressed fears regarding the groups' proliferation and their close links to al-Qaeda.
A copy of the report, which was submitted by regional police to Pakistan-administered Kashmir's cabinet on 25 March, was obtained by the BBC in Islamabad.
It finds that three banned groups - Harkatul Mujahideen, Jaish-e-Mohammad and Lashkar-e-Taiba - are active in Muzaffarabad.
Harkatul Mujahideen and Jaish-e-Mohammad are said to be planning to open madrassas, or Islamic schools, in the city where Lashkar-e-Taiba is already operating a madrassa.
"No officials are allowed to enter these premises to gather any sort of information," the report says.
"We fear these madrassas maybe a cover for furthering militant activities."
The report also elaborates how the militant groups are growing in size and number across Kashmir.
It especially mentions the Neelum district, where they are said to be at their most powerful.
The report says the militants are involved in the logging of trees, one of the most lucrative trades in the region.
They have also set up offices in the Kandal Shahi market in Neelum, where they have become a major law and order headache, the report says.
The report mentions an incident which led to the killing of some locals and a resulting stand-off with the militants.
"The situation was only resolved by the intervention of the local administrator and senior army officials," the report says.
It then goes on to say that the authorities should take up the matter with the intelligence agency responsible for the militants.
The report says officials from that agency should relocate the militants to some area near the border, otherwise clashes with locals could take place.
The report comes as Pakistan's security forces are involved in a fully fledged operation against the Taliban.
The militants are said to be backed up by the jihadi organisations, especially the Jaish-e-Mohammad and the Harkatul Mujahideen.
Jaish-e-Mohammad has been involved in several assassination attempts on top Pakistani officials, including former President Pervez Musharraf.
Its members were also responsible for the kidnapping and murder of Wall Street journalist Daniel Pearl, and are said to have carried out the attack on the Indian parliament.
Harkatul Mujahideen is the Jaish's parent organisation and one of the largest militant groups in the world.
Lashkar-e-Taiba remains the prime suspect in the Mumbai attacks and is India's enemy number one.
The charity Jamaat-ud-Dawa has been accused of being a front for Lashkar-e-Taiba - but it denies any links with militants.
Local people have confirmed to the BBC that there has been a great increase in militant activity in the regions mentioned.
"These people are being protected here," said Raja Faisal Majeed, a lawyer living in a village near where some of the militant groups have set up base.
"Sometimes they operate under the guise of a charity, sometimes as a school. We have protested against them to no avail."
The deputy chief of Jamaat-ud-Dawa, Abdurehman Makki, told the BBC that the group had not purchased any properties in the area or been involved in any alteracations with locals in the area.
Despite the fact that the groups mentioned in the report are banned under Pakistan's terrorism act, it does not advocate any action against them other than to keep an eye on their activities.