The strategically located lake, approximately 14,000 feet (4,267 meters) above sea level, covers an area stretching from the Indian territory of Ladakh to Tibet controlled by the Chinese, in the region of Greater Kashmir where India, China and Pakistan they claim territory.
The LAC, which marks the de facto border, passes by the lake.
At least 20 Indian soldiers were killed in that incident. China has never recognized a victim of this confrontation.
In a joint statement, both sides agreed to strengthen communication on the ground to avoid misunderstandings or actions “that could complicate the situation”.
They also agreed not to take any unilateral action to change the situation there, the statement said.
India and China share a 3,379 km long border in the Himalayas, but both sides claim territory on either side of it.
The LAC was created in the wake of the 1962 Sino-Indian war and appears on maps, but India and China do not agree on its precise location and both regularly accuse the other of overtaking it or trying to expand its territory.
In 1996, the two countries signed an agreement that neither side should open fire less than 2 kilometers (1.24 miles) from LAC to “prevent dangerous military activities”.
James Griffiths and Helen Regan of CNN contributed to this report.