The Israelis say they have seized a ship carrying weapons for Lebanese militant group Hezbollah.
Israel intercepted a large arms shipment last year
The raid took place on Wednesday in international waters off the Lebanese and Israeli coast, it is reported.
Nine people are said to have been arrested, including a member of Hezbollah, and the boat was towed back to the Israeli port of Haifa.
Israeli Foreign Minister Silvan Shalom said the arms were being transported from Lebanon to Palestinian militants in the Gaza Strip.
He added that the incident showed that Palestinian leader Yasser Arafat was behind terror operations.
"There is no doubt that those involved in the affair are
very close to Arafat," he told Israeli television.
"This is not the first time."
Hezbollah officials in Beirut issued a statement saying that they had no knowledge of the boat or of the reported arrest.
"We have no knowledge of the story being circulated by Israeli
sources and guarantee that no member of Hezbollah has been arrested in the past several days," the group said in a statement quoted by French news agency AFP.
Last year, Israel intercepted a 50-tonne shipment of Iranian weapons, which was destined for Palestinian militants, in the Red Sea.
Israeli sources say the current cache is much smaller than that.