The Israeli army has been told to prepare for a possible advance in what could be its deepest incursion into Lebanon for more than 20 years.
Southern Beirut has been the focus of many Israeli attacks
The defence minister's order could see the army push up to the Litani river, about 30km (19 miles) north of the border, in pursuit of Hezbollah.
Israeli jets have stepped up strikes on Beirut and north of the capital.
The moves came as UN delegates in the US struggled to reach full agreement on the wording of a ceasefire resolution.
Israel's campaign began three weeks ago after Hezbollah militants captured two Israeli soldiers.
Lebanon says more than 900 people have died since then, most of them civilians. Israel has lost 27 civilians and 40 soldiers.
Thursday was the worst day yet for Israeli casualties, with eight civilians and four soldiers killed in Hezbollah attacks.
In other developments:
- At least five people have been killed in Israeli air raids on bridges north of the Lebanese capital
- One person has been killed in northern Israel by a rocket fired from south Lebanon, a rescue service says
- Two Israeli soldiers are killed and one is injured by an anti-tank missile in the southern Lebanese village of Markaba, the Israeli army confirms
- British Prime Minister Tony Blair has delayed his holiday to continue work on a UN ceasefire resolution
- The UN's refugee agency (UNHCR) warned that fuel shortages were increasingly hampering humanitarian relief operations in Lebanon
- Malaysia is ready to send 1,000 soldiers to Lebanon to join an international peacekeeping force, the country's defence chief has said
Correspondents say the possible Israeli push would seek to force Hezbollah militants further from the state's northern border.
They say the army would seek to stop the firing of Katyusha rockets into Israel, which have a range of about 35km (22 miles).
Friday saw Israeli jets hit a number of Beirut suburbs in the Hezbollah stronghold, with local TV showing fires in the night sky.
Local media reported strikes on the Ouzai neighbourhood of southern Beirut, and warship shelling of the suburbs of Haret Hreik and Roweiss.
The Israeli military told Reuters news agency it had targeted Hezbollah offices and the home of a top Hezbollah official, along with a building operated by Palestinian group Hamas.
The Lebanese social affairs minister told the BBC parts of the capital previously untouched by bombing had been struck.
Israel suffered heavy military and civilian losses on Thursday
"The whole night was terrible," Nayla Moawad said.
"The situation is dramatic. The country is being destroyed, and we are living more than a humanitarian disaster."
Friday's action came after a threat from Hezbollah leader Sheikh Hassan Nasrallah to target the Israeli city of Tel Aviv if Israel attacked central Beirut.
Security sources in Israel told a BBC correspondent that "if Tel Aviv was hit by Hezbollah rockets, Israel would target infrastructure in Lebanon".
In his televised speech Sheikh Nasrallah also said that Hezbollah would end its rocket attacks if Israel stopped attacking what he called civilian areas in Lebanon.
Israeli ambassador to the United Nations Dan Gillerman said that suggestion was "a sign of weakness" and that Hezbollah might be "looking for a way out".
UN delegates remained optimistic of agreement on a ceasefire resolution soon, but differences remained on the wording.
"We're certainly getting close [to a resolution] within days," said US Secretary of State Condoleezza Rice.
Lebanese Prime Minister Fouad Siniora on Thursday called for a lasting solution to the conflict.
He told the BBC he wanted international leaders to pressure Israel to return detainees, provide maps of landmines and withdraw from "occupied territory".
Israeli Prime Minister Ehud Olmert has said there will be no ceasefire until an international force is deployed in southern Lebanon.
A second UN resolution would probably be needed to authorise the international peacekeeping force.
Since such a force could take weeks or months to arrive, a smaller force of French soldiers may be sent in first, BBC security correspondent Frank Gardner notes.