UN officials say they have brokered a truce after skirmishes broke out along the Israel-Lebanon border, following missile attacks from both sides.
The UN said it hoped "sporadic" firing along the border would soon subside.
Israeli jets earlier targeted guerrilla bases in Lebanon, reportedly killing two militants, in response to rocket attacks on northern Israeli bases.
Israeli Prime Minister Ehud Olmert said militants in Lebanon would "receive a clear and harsh response".
The opening salvo came when Katyusha rockets were fired across Israel's border towards a base on Mount Miron, some 20km (12 miles) from the Lebanese border. An Israeli official said up to eight rockets were fired.
This was the first rocket attack on northern Israel since December, and the rockets were thought to have travelled further into Israel than in any previous attacks.
No militant group claimed responsibility. In the past, the Lebanese group Hezbollah and Palestinian militants based in Lebanon have claimed such attacks.
The BBC's Jon Leyne, in Jerusalem, says there was no clear reason why the Israeli base was initially attacked, but a senior member of the Islamic Jihad militant group was killed on Friday in a bombing in Lebanon.
Israel responded hours later by launching air strikes on two bases run by the Palestinian militant group, the Popular Front for the Liberation of Palestine - one near Beirut and the other at Sultan Yacoub near Syria.
PFLP fighters responded with anti-aircraft fire.
Disputed area
Skirmishes then broke out between Hezbollah guerrillas and Israeli troops on opposite sides of the border. Residents of the Israeli towns of Kiryat Shemona and Nahariya were ordered to take cover.
An Israeli general said his forces attacked 20 Hezbollah posts after an off-duty soldier was wounded by sniper fire from across the border.
Hezbollah denounced Israel's air strikes as "part of Israel's targeting of security and stability in Lebanon".
Israel withdrew its forces from southern Lebanon in 2000, after an 18-year occupation.
But there is still a small disputed border area known as the Shebaa Farms, where confrontations break out regularly.
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