The leader of Lebanon's Hezbollah militants has said his group will only give up two captured Israeli soldiers in a prisoner exchange.
Israeli forces have crossed into two areas in southern Lebanon
Hassan Nasrallah also told Arabic TV network al-Jazeera Israeli attacks had not dented Hezbollah's capabilities.
Israel says it has bombed a bunker used by Mr Nasrallah and has destroyed much of the militia's missile stocks.
The UN Secretary General Kofi Annan has called on Israel and Hezbollah to bring hostilities in Lebanon to a swift stop.
Mr Annan condemned Hezbollah for sparking the latest violence in the country, but also attacked Israel for what he called its "excessive use of force".
Israel resumed its bombardment of the southern suburbs of Beirut after nightfall on Thursday, and its air force reported bombing 40 targets.
Israel's offensive has killed at least 306 people and displaced some 500,000 in Lebanon in the last nine days.
Thirty-one Israelis have been killed in the fighting, including 15 civilians killed by rockets fired by Hezbollah into Israel.
In the latest incidents:
- Four Israeli soldiers, part of an operation searching for Hezbollah militants, bases and weapons, were killed in clashes in southern Lebanon near the Israeli border on Thursday
- Two Israeli Apache helicopters collided near the Lebanese border on Thursday, killing an officer and injuring three.
Mr Nasrallah told al-Jazeera TV "Hezbollah has so far remained steadfast".
He said the group had "managed to absorb the strike" and was preparing to take "the initiative" in the fight against Israel and "offer some surprises".
"All of Israel's claims to have hit half of our missile potential and arsenal are nothing but erroneous words," he said.
Hezbollah leaders, he added, had "not been touched" by Israeli attacks.
Referring to the two Israeli soldiers whose capture nine days ago sparked the hostilities, Mr Nasrallah said they would not be freed without a prisoner exchange, to be negotiated indirectly.
"Even the whole universe would not be able to secure the release of the two Israeli soldiers unless there are indirect negotiations and an exchange of prisoners," he said.
The BBC Middle East editor says Mr Nasrallah's comments present another obstacle to a diplomatic solution to the crisis in the region.
UN Secretary General Kofi Annan has said Lebanon faces a "massive" humanitarian task that needed urgent funding.
He said he hoped to issue a UN flash appeal as early as next week.
In the absence of a ceasefire, it was "imperative" to establish safe aid corridors in Lebanon, Mr Annan said.
Israeli officials later said Prime Minister Ehud Olmert had decided to open a humanitarian corridor between Lebanon and Cyprus.
But Mr Annan's calls for an immediate ceasefire have been rejected by both the US and Israel.
America's role in solving this crisis is crucial, the BBC's Jonathan Beale reports from UN headquarters in New York.
It is the one country that Israel will listen to but Washington has so far resisted growing pressure to use its considerable influence to halt Israel's military operations.
It has left Mr Annan frustrated, our correspondent notes.
Washington, however, is sympathetic to Mr Annan's calls to provide humanitarian aid to the people of Lebanon.