Rockets hit Israel's third-largest city on Sunday, killing two civilians and seriously wounding 70 others.
Hezbollah has fired over 1,100 rockets at Israeli towns and cities in the last 11 days killing at least 17 people.
Israel has responded by attacking Hezbollah positions in Lebanon, and carrying out air and artillery strikes against civil and governmental infrastructure. The attacks have killed at least 320 Lebanese civilians.
Air raid sirens also sounded on Sunday morning in the town of Zichron Yaakov, which lies 60km (40 miles) south of the Lebanese border.
The army said it was checking if any rockets had hit the town - which would be the furthest the rockets had reached since the conflict began.
Battle for village
An Israeli gunner prays near the Israel-Lebanon border
The Israeli army has also confirmed that it has captured the Lebanese border village of Maroun Al-Ras after several days of fierce fighting against Hezbollah fighters based there.
"It can be said that the area of Maroun al-Ras, that had served as a [Hezbollah] vantage point over Avivim, now serves as an [Israeli] vantage point over Bint Jbail," Major-General Benny Gantz, the Israeli ground-force commander, said on Saturday.
Six Israeli commandos and an unknown number of Hezbollah members died in the battle for the village which is less than a kilometre inside Lebanese territory.
Fighting was still continuing on Sunday morning.
"There is some small fighting around the village, not inside, this morning," Milos Strugar, spokesman for the UN Interim Force in Lebanon said. "The Israelis have been on the Lebanese side of the borders for four days now."
Strugar said there were no other Israeli forces inside Lebanese territory at any other point along the border on Sunday.
'No invasion planned'
Ehud Olmert, the Israeli prime minister, told the cabinet he would be ready to negotiate with the Lebanese government, but that the conflict would "last a very long time" while Israel "destroyed terrorist infrastructure."
"Lebanese Prime Minister Fuad Siniora is a partner for negotiations when the time is right for that," he said during the cabinet meeting.
Amir Peretz, the defence minister, said that no widescale invasion of Lebanon has been planned.
"The ground operation is focusing on a limited entry of forces," he said. "We are not dealing with an invasion of Lebanon."
Earlier, he told Germany's foreign minister that Israel supported the deployment of an international force in southern Lebanon, an official said.
"Due to the weakness of the Lebanese army, Israel supports the possibility of deploying a multinational force with a strong mandate," an official quoted Peretz as telling Frank-Walter Steinmeier.
Olmert had previously called the peacekeeping force proposal premature.
Fresh Israel air strikes hit a Hezbollah-run Islamic centre in the Lebanon's southern city of Saida wounding five people while jets also bombed Hezbollah buildings in Beirut on Sunday.
Two civilians died in early morning air raids that hit villages along the border, witnesses said. A 15-year-old boy was killed at Meis al-Jabal, and a man was killed at Blida.
A minibus carrying Lebanese civilians fleeing the border villages has been hit by an Israeli air strike, killing three and wounding 13, Lebanese security forces said.
Other attacks hit factories in Al-Manara and Teanayel in eastern Lebanon killing one person and wounding two.
An unarmed UN military observer was wounded during fighting between Hezbollah and the Israeli army in southern Lebanon, a UN spokesman said.
"According to preliminary reports, the fire came from Hezbollah," the spokesman said.
The latest bombing raids mean that more than 350 Lebanese have died in the conflict.
Refugees from south Lebanon have continued to stream northwards after the Israeli army warned villagers living near the border to leave their homes.
Israeli air attacks have affected all of Lebanon's communities
The UN estimated on Sunday that over 500,000 Lebanese have left their homes since fighting began 11 days ago.
Thousands of them have fled north fearing an Israeli invasion. Aljazeera reports that about 35,000 refugees had arrived in the city of Sidon alone.
Foreigners continue to flee the country. Ships and aircraft worked through the night, taking more people from Lebanon to Cyprus and Turkey.
In Beirut, a United Nations official said that Israeli air attacks on the city amounted to war crimes
"It is horrific. I did not know it was block after block of houses," said Jan Egeland, the UN emergency relief coordinator, as he toured the shattered Haret Hreik district where the Israeli air force repeatedly attacked a Hezbollah's headquarters.
"It makes it a violation of humanitarian law," he said.