Israel has launched night air strikes on bridges and roads in southern Lebanon, as the search goes on for two soldiers seized by Hezbollah militants.
Israeli raids targeted bridges linking north and south Lebanon
Israel's military said the raids were to stop Hezbollah moving the soldiers.
The strikes came as an urgent session of the Israeli cabinet endorsed a strong response against the militants.
Israeli PM Ehud Olmert said the capture was an "act of war", but Hezbollah leader Hassan Nasrallah insisted the two would only be returned via talks.
He said if Israel wanted to escalate the crisis his forces were ready for confrontation.
Mr Olmert said he held Beirut responsible, but Lebanese Prime Minister Fuad Siniora denied any knowledge of the Hezbollah operation and refused to take responsibility for the soldiers' capture.
At least eight Israeli soldiers and two Lebanese civilians have been killed since the troops were captured.
Three Israeli troops were killed in Hezbollah's cross-border raid and four more died when a tank blew up in the subsequent offensive, Israel's first since 2000. The eighth soldier died in the ensuing battle.
Hezbollah is seeking the return of Palestinian, Lebanese and other Arab prisoners held in Israeli jails.
Israeli aircraft have been flying deep into southern Lebanon, while ground troops entered an area of southwestern Lebanon near where the soldiers were captured.
One of the latest raids, after dark on Wednesday, targeted a main road linking Beirut with the south near the village of Damour, 16km (10 miles) south of the capital.
At least 16 Lebanese have been reported wounded in the raids.
The news of the clashes comes amid a major Israeli offensive in the Gaza Strip. Israel has been trying to secure the release of a 19-year-old soldier, Cpl Gilad Shalit, who was captured by Palestinian militants on 25 June.
A total of 23 Palestinians were killed on Wednesday, in the worst day of fighting since then.
Mr Olmert chaired an emergency cabinet meeting which discussed further action, but he has already ruled out negotiations.
Israel has filed a complaint with the United Nations, urging the Security Council to enforce resolutions calling on the Lebanese government to disarm militias and extend its authority throughout its territory.
In Washington, the White House has called for the immediate release of the captured Israeli soldiers, saying it held Iran and Syria responsible for the attack.
Mr Nasrallah said any invasion of Lebanese territory would be met by force.
If the Israeli enemy wants escalation, we are ready for the confrontation
"The prisoners in our hands will not return to Israel except through indirect negotiations and exchange of prisoners and peace," he said.
"If the Israelis are thinking about carrying out a military operation to recover them they are dreaming.
"We are not seeking escalation, we don't want to lead the region into war. However, if the Israeli enemy wants escalation, we are ready for the confrontation."
The operation had been planned for several months, he added, long before the capture of Cpl Shalit in Gaza.
UN Secretary General Kofi Annan both condemned Israel's Lebanon offensive and called for the soldiers' release.
Israel ended its occupation of southern Lebanon six years ago.