At least 15 people have been killed in a barrage of Hezbollah rocket strikes on northern Israel.
Israel has suffered its highest number of casualties in a single day
Twelve reservist soldiers died in an attack on the town of Kfar Giladi.
A number of rockets later landed on the Israeli port of Haifa, killing three people and injuring dozens. Reports said at least one building collapsed.
Meanwhile, the UN is debating a draft resolution on the crisis, demanding Hezbollah halt all attacks and Israel stop all offensive military operations.
However, Lebanon has formally asked the UN Security Council to revise its proposed resolution and diplomats in New York say a vote might not now come until Tuesday.
Israel has continued raids in Lebanon, killing at least 14 people.
Rockets rain down
The death toll in Kfar Giladi is the highest suffered by the Israelis in a single attack since the conflict began almost a month ago, after Hezbollah militants captured two Israeli soldiers.
Eyewitnesses said the Hezbollah rocket barrage on northern Israel had lasted more than 15 minutes.
Shortly after dark, several rockets landed in residential areas of Haifa, Israel's third largest city, killing at least three and injuring dozens.
One rocket hit an apartment block which partly collapsed, trapping residents inside. Rescue teams were shifting rubble by hand to free them.
The BBC's Humphrey Hawksley in Haifa says the renewed rocket assault followed a lull and may have taken some residents by surprise.
He describes people in the street throwing themselves to the ground as the rockets hit - following government advice on the best way to avoid the hail of ball-bearings packed into the warheads.
Israel continued pounding targets around Lebanon on Sunday
Israeli army spokesman Jacob Dallal told Associated Press news agency that Israeli jets had attacked a site in Qana in southern Lebanon and destroyed the rocket launchers that were used in the attack on Haifa.
Other rocket launchers were destroyed in an attack north of Tyre, he said.
Hezbollah has fired more than 3,000 rockets into northern Israel since the conflict began.
Israel is continuing other operations in Lebanon with dozens of air strikes in the south and reports of fierce clashes on the ground.
Five Lebanese civilians died early on Sunday in an air raid on the southern village of Ansar, according to Lebanese sources. Reports say three others were killed in an attack on the coastal town of Naquora.
Israeli jets also carried out fresh bombing raids on Beirut's southern suburbs, in and around the port city of Tyre, and on the eastern Bekaa Valley.
The UN draft resolution, agreed after much debate between France and the US, calls for a "full cessation of hostilities".
But Syria called the resolution text a "recipe for the continuation of the war" and the Lebanese representative at the UN, Nouhad Mahmoud, said he had submitted an amendment calling for Israeli forces to withdraw from Lebanese territory.
A 90-minute meeting of the five permanent Security Council members on Sunday failed to reach agreement on the amendment, diplomats said.
"I think that means a vote on Tuesday is the more likely scenario," one diplomat from a permanent member country told Reuters news agency.
Russian ambassador Vitaly Churkin added: "Unfortunately I don't think that there is a magic wand."
Senior Israeli officials had said they were broadly happy with the text of the resolution.
An Israeli spokesman told the BBC his government could be prepared to pull all its forces out of Lebanon once the resolution was passed and when Israel had cleared what he called "the last remaining Hezbollah strongholds".
He said Israel would then monitor the south of Lebanon from behind its own border and reserve the right to use air strikes and occasional ground incursions.
The spokesman said that once a UN force had arrived Israel would in effect hand over the policing of southern Lebanon to the UN and Lebanese government.