The Hatf IV Shaheen 1A missile was fired into the sea, the military said.
It was described as an intermediate-range missile having a longer range than its predecessor, the Shaheen 1, which is believed to fly up to 750 kilometres.
"The improved version of Shaheen 1A will further consolidate and strengthen Pakistan's deterrence abilities," said Lieutenant General Khalid Ahmed Kidwai, who witnessed the launch and is responsible for the country's nuclear programme.
Intermediate-range ballistic missiles have a range of 3,000 to 5,000 kilometres, according to globalsecurity.org.
If the Shaheen-1A is indeed an intermediate-range missile, it would represent a quantum leap from the previous version. Pakistan's longest range missile before yesterday's launch was believed to be the Shaheen II, with a range of 2,000 kilometres. That is far enough to hit targets anywhere in India.
India announced last Thursday that it had successfully test-launched a new nuclear-capable, long-range missile, the Agni V, which has a range of 5,000 kilometres.
Pakistan and India have fought three major wars since they achieved independence from the British Empire in 1947. Relations have warmed somewhat over the past year, especially with respect to trade, but the two still consider each other enemies and regularly conduct tests of weapons systems.
"This is what has been happening over the past few years," said Talat Masood, a Pakistani defence analysts and retired army general. "The tests by Pakistan and India follow each other to show that their programmes are robust."
India's latest test, however, was conducted with an eye towards its eastern neighbour, China, rather than Pakistan to the west. The Agni V gave India the capability of striking Beijing and Shanghai for the first time, and the government hailed the launch as a major boost to its efforts to counter China's regional dominance and become an Asian power in its own right.
India had already achieved the ability to reach anywhere in Pakistan with the development of its Agni I and Agni II missiles, said Rahul Bedi, a defence analyst in India.
"Agni V has nothing to do with Pakistan," Mr Bedi said.