The denial came even though the released prisoner, Surjeet Singh, 69, had told Indian media on Thursday that he was spying for India when he was arrested by Pakistani authorities in the 1980s.
Singh, who was sentenced to death after being convicted by a Pakistani court on spying charges, returned to India on Thursday after being freed.
"We do not accept this (that Singh was a spy). It is completely wrong," Indian Home Secretary RK Singh told a news conference in New Delhi.
"We deny it (because) we do not do this kind of thing," he said in response to reporters' questions about whether the freed man worked for government agencies.
"Neither do we do spying, nor we send spies," the home secretary added.
The two Singhs are not related.
Surjeet Singh had told Indian reporters after returning home that he had gone to Pakistan for "spying" and named the Research and Analysis Wing, India's espionage agency, as his paymaster.
In April 2011, Gopal Das, one of Pakistan's longest-serving Indian prisoners, was released after Pakistan's President Asif Ali Zardari intervened in his case.
Upon his release, Das admitted he was an Indian spy and lashed out at the Indian authorities for abandoning him during his 23 years in jail.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ