UN Secretary General Kofi Annan has said Israel has made significant progress in withdrawing its forces from southern Lebanon.
Mr Annan said the conflict's causes must be addressed
The UN chief said Israel and Hezbollah had mostly complied with a UN resolution to end the conflict.
But he said that the 34-day fighting had plunged the Middle East into instability once more.
The conflict was sparked by the capture by Hezbollah of two Israeli soldiers in a cross-border raid on 12 July.
'Much to be done'
The BBC's Mike Wooldridge at the UN in New York said Mr Annan's report painted a mixed picture of progress since the ceasefire sanctioned by UN Resolution 1701.
In his report to the Security Council, Mr Annan noted that much work remained to be done in the aftermath of the conflict.
But he acknowledged that both Hezbollah and Israel seem determined to uphold the agreement.
He said that, on the whole, the ceasefire had held but he singled out an Israeli raid in eastern Lebanon on 19 August as a "severe violation".
He underlined that any long-term solution must address the underlying causes of the conflict and indicated that he expected the UN peacekeeping force in Lebanon to reach 5,000 soldiers - a third of its target strength - by the end of this week.
Mr Annan called for an end to Israeli over-flights in Lebanese air space and expressed concern about the danger of unexploded ordnance in southern Lebanon.
He also suggested that the disarming of Hezbollah should take place through a political process to restore the authority of the Lebanese government in its own territory.
The unconditional release of the Israeli soldiers captured by Hezbollah before the start of the conflict and the issue of Lebanese prisoners detained in Israel are both of vital importance, he added.
On Tuesday Hezbollah's leader, Hassan Nasrallah, said the two soldiers held by his group will only be released if a Lebanese militant held by Israel for 27 years is also freed.
Mr Nasrallah said that any deal with Israel would have to include Samir Qantar, convicted of several murders after a cross-border raid in 1979.