Women and children were among those killed when the convoy was hit. "Bodies litter the road," an eyewitness said.
Israel has expanded its campaign launched after Hezbollah militants seized two Israeli soldiers. More than 70 Lebanese have been killed.
Hezbollah has responded with rockets. Several have hit the town of Tiberias in the deepest such attack in Israel.
Three Israeli sailors are missing after their ship was hit by a Hezbollah missile on Friday. The body of a fourth was found, according to Israeli media.
The ship had caught fire after it was hit by an Iranian-made missile, the Israeli military said.
Mid-East crisis map
Israeli jets have also fired rockets on the Lebanon-Syrian border.
The exact location of the Israeli action is not clear, but Syria has denied that Israel hit targets in its territory.
"The air force is bombing roads and bridges on the border between Lebanon and Syria to prevent Hezbollah from taking our captured soldiers out of the country," an Israeli army spokeswoman said, quoted by the Agence France Presse news agency.
Israeli Prime Minister Ehud Olmert has said the offensive will continue until Hezbollah releases the soldiers and stops firing rockets at Israel.
At least four people have been injured in the Tiberias rocket-fire, which came as Israel deployed Patriot interceptor missiles in the northern port city of Haifa.
In other attacks:
Nowhere to flee
A number of families were fleeing their village of Marwahin on the Israeli border when their convoy was struck by missiles on the coastal road to Tyre, a UN spokesman told the BBC.
ISRAEL IN LEBANON
Local residents told al-Jazeera TV the villagers had been hit after being told to leave Marwahin by the Israelis and then refused shelter by the UN forces.
The main road had been under continuous bombardment, Ahmad Ali Ubayd said.
"Where is the international justice when children, women, and the elderly are killed?" he said.
The Israeli Army said the responsibility for endangering the civilian population rested with Hezbollah, and they regretted civilian casualties while targeting areas used as a launching ground for missiles.
Correspondents say there is nowhere safe to go for many trying to flee the south.
In past hostilities, much of the mainly Shia population of the south has sought refuge in Beirut's largely Shia southern suburbs, which are now under attack too.
A number of bridges, petrol stations and key roads have also been hit, including the main road linking northern Lebanon to Syria.
HAVE YOUR SAY
Thousands of foreigners have fled Beirut, leaving its economy in tatters.
Countries including the US and France are making plans to evacuate their nationals from Lebanon.
The presidents of the US and Russia have differed in emphasis in voicing concern about the Mid-East crisis at the G8 summit in St Petersburg.
George W Bush urged Lebanon's Hezbollah to disarm while Vladimir Putin called for a "balanced" use of force by Israel.
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