The declaration, by an Al-Qaeda-affiliated propaganda channel, marks the first time the international jihadist group has pushed so far into Kashmir, a restive Muslim-majority region divided between India and Pakistan but claimed in full by both.
Zakir Musa, a 23-year-old militant based in Indian-administered Kashmir, was named leader of the new group by the Global Islamic Media Front, a propaganda organisation linked to Al-Qaeda.
The statement, published Wednesday by US monitor SITE Intelligence Group, said "the jihad in Kashmir had entered a stage of awakening" and that the new movement would "liberate our homeland".
More details about the new group, 'Ansar Ghazwat-Ul-Hind', would be released soon, the statement added.
For decades, armed groups in Kashmir have waged an insurgency against Indian rule, fighting for independence or a merger of the territory with Pakistan.
Al-Qaeda established an Indian chapter in September 2014, but it has not garnered wide support.
The announcement of a new Islamist outfit in Kashmir linked to the global extremist group was an "ideological shift", said Kashmir police chief S. P. Vaid.
"Earlier, people were fighting for something different," Vaid told AFP on Thursday.
"For us, whoever picks up a gun is a terrorist. Musa is a terrorist. Organisation doesn't matter. We'll see, we'll face it."
Musa is a controversial figure in Kashmir, having ruffled feathers by criticising top separatist leaders for not pursuing Islamic law in the contested region.
Separatist groups have repeatedly stated that Al-Qaeda and the Islamic State group have no role in the Kashmiri self-determination movement, claiming the armed movement against Indian occupation as "indigenous".
Pakistan-based militant group Lashkar-e-Taiba (LeT) said the announcement was an Indian conspiracy to label Kashmir's freedom struggle as terrorism.
LeT spokesman Mehmood Shah in statement issued late Thursday said "groups such as AL-Qaeda and ISIS are being brought up to label the legitimate freedom struggle as terrorism."
Security officials consider the young militant's following to be small.
Musa was understood to have succeeded Burhan Wani as leader of Hizbul Mujahideen after the charismatic rebel leader was shot dead by Indian forces last July.
But Musa fell out with the militant group, the largest in Kashmir, over ideological differences.
Wani's killing sparked months of widespread protests against Indian rule and left nearly 100 civilians dead and thousands injured.
Kashmir, divided between India and Pakistan since 1947, is one of the most heavily militarised spots on earth with a long history of conflict.
The conflict has left tens of thousands, mostly civilians, dead.