The Israeli army says it has seized a number of Hezbollah fighters in a raid on Baalbek, a town deep inside Lebanon.
Israel has vowed to widen ground operations in south Lebanon
After air strikes on the town, 100km into Lebanon, in which 11 people died, Israeli commandos landed by helicopter and fought a lengthy gun battle.
In a statement on al-Manar television, Hezbollah said those captured in Baalbek, one of its strongholds, were "ordinary citizens", not militants.
Israeli troops have also pushed further into south Lebanon overnight.
The incursion into Baalbek began before midnight with several air strikes.
At least 11 civilians, including five members of the same family, were killed in the bombing.
After the bombardment, military helicopters then landed an Israeli commando unit near a hospital on the outskirts of the town, which led to fierce clashes with Hezbollah guerrillas lasting several hours.
Local residents told AP the hospital was run by people close to Hezbollah and funded by an Iranian charity.
The Israeli military says that it seized at least three Hezbollah members in the raid and a spokeswoman told Reuters news agency that the captured militants had been taken to Israel.
Hezbollah say they inflicted casualties on the commando unit but a spokeswoman for the Israeli military says all their troops returned safely to base.
Baalbek, which is a Hezbollah stronghold and home to several senior members of the group, has been repeatedly bombed by Israel since the conflict began.
The BBC's Martin Asser - who visited Baalbek a day before the raids - said the mainly Shia Muslim town was very tense, with many families having fled.
This is the first time Israel has sent ground troops so far into Lebanon since its offensive began over three weeks ago.
The BBC's Michael Buchanan in Beirut says that there had been a slight mood of optimism in Lebanon that diplomatic efforts to bring about a ceasefire following the deadly air strike on the Lebanese village of Qana, in which 54 civilians died, were gathering momentum.
Following this raid, that mood has disappeared, our correspondent says.
Meanwhile, Israeli planes attacked a Lebanese army base south-east of Sidon early on Wednesday, killing three Lebanese soldiers.
A 48-hour partial suspension of Israeli air strikes, triggered by the raid on Qana, ended overnight.
In other developments
- Israeli Prime Minister Ehud Olmert said Israel was "winning the battle" against Hezbollah, but also said a political process that will lead to a ceasefire is now under way
- US Secretary of State Condoleezza Rice said an agreement on ending the fighting was possible within "days, not weeks" - in apparent contrast to Israeli Deputy Prime Minister Shimon Peres, who said he thought the fighting would end within "weeks, not months"
- French officials said that France would boycott a meeting on Thursday of potential contributors to an international stabilisation force - the official said France considered the meeting "premature".
'Fighting to intensify'
Tuesday saw fierce fighting across southern Lebanon, with casualties on both sides.
Israel said an anti-tank missile killed three of its soldiers in the border town of Ait al-Shaab, while Hezbollah said four of its fighters died in clashes further north.
More Israeli troops crossed into Lebanon, entering at four different points the border, Israeli officials told the Associated Press.
The BBC's Bethany Bell in Jerusalem says many in Israel expect the fighting to intensify over the next few days.
The Israeli security cabinet on Tuesday unanimously approved widening Israel's ground offensive.
Some reports said troops would move into Lebanon as far as the Litani River - up to 30km (18 miles) from the border.
Israel warned civilians north-east of the river to leave their homes.
Israel launched the current offensive after Hezbollah militants seized two of its soldiers in a cross-border raid.
After nearly three weeks of fighting, about 750 people - mainly civilians - have been killed by Israeli action in Lebanon, according to Lebanon's health minister.
A total of 54 Israelis, including at least 18 civilians, are known to have been killed by Hezbollah.
[Note: The number of people killed in the Israeli bombing of Qana was later revised. The Washington based human rights group Human Rights Watch investigated the incident and issued a report on 3 August saying that 28 people were known to have died, while 13 people were missing.]
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