Israel has called up thousands of reserve troops and told civilians to quit southern Lebanon immediately, amid threats of a large-scale incursion.
A pall of smoke hangs over Tyre from the constant shelling
Israeli troops are already fighting Hezbollah inside Lebanon and have been heavily shelling the border area.
Correspondents in Tyre say the sound of explosions is constant, and with villages cut off and roads severed, people are in grave peril.
Meanwhile, Hezbollah rockets have again hit the Israeli city of Haifa.
The crisis was triggered by the capture of two Israeli soldiers by Hezbollah militants on 12 July.
In other developments:
Leaflets on Lebanon
- US Secretary of State Condoleezza Rice says she is travelling to the Middle East on Sunday to seek a lasting solution to the crisis - but not an immediate ceasefire that would return the region to the pre-conflict era
- A UN-run observation post on the border was struck by a shell or mortar during fighting between Israel and Hezbollah militants, but no-one was hurt
- French Defence Minister Michele Alliot-Marie said France would launch an evacuation mission to rescue about 400 French citizens trapped in southern Lebanon
- The evacuation of other foreign nationals from Lebanon has continued, with thousands more expected to arrive in Cyprus on Friday
Correspondents in Jerusalem say it is understood the Israeli reservists being called up could fill in for troops in the West Bank and Gaza, releasing other soldiers to go up to the northern front.
The move has widened speculation that Israel is preparing for a large ground offensive.
Israeli Defence Minister Amir Peretz has warned that Israel is prepared to launch a full-scale ground operation if necessary, saying "we have no intention of conquering Lebanon but... we will do it without thinking twice".
The call-up came as Israel dropped leaflets on southern Lebanon warning residents to immediately evacuate an area approximately 32km (20 miles) wide.
Senior Lebanese officials said the country's army would go into battle if Israel invaded Lebanon.
The regional capital of south Lebanon, Sidon, says that about 28,000 internally displaced people have already crammed into the small sea port and that it is now becoming dangerously overcrowded.
One man told the BBC he had been forced from his home in Tyre because "Israel was bombing everywhere".
Sidon's mayor has warned that food, medicines, water and accommodation are running out.
Israel has continued its campaign of air strikes with war planes bombing more than 40 targets, mainly in southern parts of Beirut in the early hours of Friday.
Lebanese Prime Minister Fouad Siniora said the number of Lebanese killed in the 10 days of violence is now more than 330.
In northern Israel, two fresh waves of Hezbollah rockets hit the city of Haifa, causing at least 15 injuries.
Three were injured, though none seriously, when a rocket landed on a post office on Masarik square.
One witness who was just 30 metres from the building when it was attacked described the moment the missile struck.
"There was a very strong boom and people were panicking and running in different directions. People were crying and did not know what to do," Kiwan Ghalev told the BBC.
Thirty-four Israelis have been killed in the fighting, including 15 civilians killed by rockets fired by Hezbollah into Israel.
In an interview with Arabic TV network al-Jazeera, Hezbollah's leader Sheikh Hassan Nasrallah said his group would give up the Israeli soldiers only in a prisoner exchange.
Sheikh Nasrallah added that the Israeli attacks had not dented Hezbollah's capabilities.