The pilot was reported missing and a court of inquiry has been ordered.
Kangra Superintendent of Police Santosh Patial told reporters that the aircraft crashed in Patta Jatian village in Jawali area around 1.30 p.m. The pilot's whereabouts are being ascertained, Patial said.
The accident spot is around 70 km from district headquarters Dharamsala.
According to IAF officers, the MiG-21 had taken off from the Pathankot IAF station.
Two IAF choppers had landed at the site and airmen were carrying out an investigation.
On June 5, an IAF Jaguar fighter jet had crashed in Kutch in Gujarat soon after takeoff, killing the pilot.