An Indian delegation led by Water Resources Secretary Dhruv Vijai Singh arrived in Pakistan late last night for the talks.
India`s Indus Waters Commissioner G Ranganathan is also a member of the delegation.
The Pakistani side is headed by Water and Power Secretary Javed Iqbal.
The two sides will discuss Pakistan`s objections to the Tulbul navigation project at the mouth of the Wullar lake in Jammu and Kashmir.
India started work on the project in 1985 to make the Jhelum river navigable in summer.
The project was stopped after Pakistan complained that it violated the Indus Waters Treaty of 1960.
Pakistan contended that the project could be used by India to control the flow of the Jhelum, a charge denied by New Delhi.
The two countries have held 13 rounds of talks on the issue so far, including four rounds under the composite dialogue.
Foreign Office spokesperson Tehmina Janjua has said that Pakistan hopes that talks with India would bring positive results.
All outstanding issues related to water sharing, especially Tulbul navigation project, will be discussed in detail, she said.
Both countries have had successful dialogue between their Home and Interior Secretaries and Commerce Secretaries and there has been "constructive progress" in these talks, which clearly indicates that both sides are committed to constructive engagement, Janjua told the media.