Israel, which has bombarded Beirut's suburbs and southern Lebanon with aircraft and artillery since July 12, has said it wants to weaken Hezbollah so that the Lebanese government can disarm the group.
In an interview with Aljazeera.net late on Friday, Siniora said his government cannot force Hezbollah to disarm as long as Israel continues to occupy the Shebaa Farms.
He said: "I'd like to remind you that the Shebaa Farms is not a property of Hezbollah. It's a property of Lebanon and it's for all the Lebanese.
"So anyone who would say that giving this land back to Lebanon would be considered a victory for Hezbollah is mistaken. This issue has to be looked at in totality. Lebanon gets back its land and, ultimately, Israel gets a safe border."
Israel withdrew from the country in May 2000 but it maintained control over the Shebaa Farms that is claimed by Lebanon.
The UN says that the Shebaa Farms are Syrian territory captured in the 1967 Arab-Israeli war.
Siniora also cited Lebanon's casualty figures as indication of who was paying the price for the recent conflict.
"Do you think that Israel has been bombing Hezbollah fighters? No, this is a war against Lebanese civilians."
Factbox: The Shebaa Farms
The Shebaa Farms is the name given to a 10 km sq area of farmland at the point where the Lebanese, Syrian and Israeli borders meet.
The Shebaa Farms were first occupied by Israel in the wake of the 1967 War, also known as the Six Day War.
On Saturday, the UN said at least 600 Lebanese have been killed and over 3,220 injured in the conflict so far while nearly 800,000 have been displaced.
Siniora said: "Israel cannot win this war. Yes, it can kill; but it cannot win the war."
His comments came a day after two Hezbollah ministers agreed to his seven-point package delivered Wednesday at an international conference in Rome.
The package calls for an immediate ceasefire to be followed by the release of Lebanese and Israeli prisoners, Israeli withdrawal behind the border and the return of Lebanese displaced by the fighting.
The two cabinet ministers representing Hezbollah voiced their reservations over some parts of the plan, such as the call for spreading Lebanese government authority over the entire country and strengthening an international force in south Lebanon.
But Siniora told Aljazeera.net that Lebanon can no longer afford to be heavily bombarded by the Israelis every few years. That's why, he insisted, the country should get to a situation where the Lebanese authorities are the only body that could hold weapons.
So far, the council for development and reconstruction has estimated Lebanon's losses due to the destruction of infrastructure in this war alone to be over US$2billion.
However, the prime minister said that confining arms to the Lebanese army would have to be done only after Israel pulls out from the Shebaa Farms.
Siniora and Condoleezza Rice in Rome on 26 July
He said: "Hezbollah has expressed many times that it has the following objectives: liberating Lebanese occupied land, getting maps of all landmines planted in southern Lebanon during the Israeli occupation, and securing the release of our detainees who are held in Israeli jails."
He further said that those who want Hezbollah to disarm they should work on removing the causes that are enabling the Shia group to keep its weapons rather than exerting pressure on it.
"There are reasons why Hezbollah's military wing exists. If we take them away, there will be no reason for it to continue."
Siniora said: "If Israel does not want to withdraw from Shebaa, it means it does not want to establish stability in the region. Who is really causing the violence here? It's the warring party insisting on aggression by keeping other people’s lands."
Siniora warned that the continuation of the Israeli wide-scale attack on Lebanon would only lead to more deaths and destruction that would fuel hatred.
The premier refrained from criticising George Bush, the US president, and Tony Blair, the British prime minister, for failing to call for an immediate truce following their meeting Friday to discuss the Middle East crisis. Asked if they have let him down, he said: "I don’t like to use the word disappointment."