Israeli warplanes hit Hezbollah strongholds in southern Lebanon and the Bekaa valley east of the capital, Beirut, on Thursday, killing at least seven people, reports said.
Aircraft also fired more than 400 missiles overnight on the town of Khiam, where four United Nations observers were killed on Tuesday night.
At least 40 Hezbollah rockets also hit several towns in northern Israel, including Kiryat Shimona, where a toothpaste factory was hit.
One person was reported wounded after a rocket hit a house in Kiryat Shimona, Israeli media reported.
Clashes also raged around the town of Bint Jbeil, a Hezbollah stronghold near the border that has been fought over for four days. At least nine Israeli troops were killed there on Wednesday, the biggest one-day death toll so far in the two-week offensive.
On Thursday Haim Ramon, the Israeli justice minister, said that Israel now considered any person remaining in southern Lebanon to be part of the Hezbollah group.
"Everyone who is still in south Lebanon is linked to Hezbollah, we have called on all who are there to leave," he said before an emergency Israeli cabinet meeting.
"Everyone who is still in south Lebanon is linked to Hezbollah - we have called on all who are there to leave"
Haim Ramon, Israeli justice minister
"Maximum firepower has to be used. We have to exploit the advantages that we have over Hezbollah with the air force and artillery and be cautious when we use ground troops."
But humanitarian officials say thousands of civilians remain trapped in villages across the border region in southern Lebanon. Hundreds of thousands have also been displaced by the fighting.
A report by the International Committee of the Red Cross (ICRC) said its delegates had visited several villages on the Lebanese-Israeli border, including Blida, near Bint Jbeil, where they found about 700 people, including 300 children, sheltering in a mosque.
'Buried in rubble'
Villagers were running short of water, food and medicine, displaced people were living in schools and patients were stranded in hospitals, it said.
"Dead bodies had not been removed from the streets and others were still buried in rubble," the report said.
On Thursday a Jordanian military aircraft carrying aid arrived in Beirut. On Wednesday, three other flights with UN supplies landed in the city.
The Lebanese health minister has said that Israel's 16-day-old bombardment may have killed up to 600 people in Lebanon.
Mohammad Khalifeh said on Thursday that hospitals had so far received 401 bodies of victims of the Israeli campaign.
"On top of those victims, there are 150 to 200 bodies still under the rubble," he said. "We have not been able to pull them out because the areas they died in are still under fire."