The Foreign Ministry said the Pakistani High Commission in New Delhi has been asked to submit a report on the alleged suicide by 42-year-old Showkat Ali.
"This is an issue we have raised earlier too. All prisoners who have completed their term should be sent back on humanitarian grounds," Foreign Office spokesperson Tasnim Aslam told PTI.
She said the issue of prisoners on both sides should be handled in a humanitarian manner.
According to the Jammu police, Ali, who hailed from Sialkot in Punjab province, ended his life late last night by hanging himself from an iron grille inside his barracks.
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He had been lodged in the jail since 2011.
An inquiry by a magistrate has been ordered into the alleged suicide and Ali's body was sent to a government hospital for autopsy.
Since December 2013, two Indian prisoners have died in jails in Karachi.
According to lists exchanged on January 1 between the two countries, there are 281 Indian prisoners in Pakistan while 396 Pakistani prisoners are in Indian jails.