The Israeli justice minister, Haim Ramon, said Israel had "in effect obtained the authorisation to continue our operations" by Wednesday's 15-nation Rome conference on the crisis in Lebanon.
Ramon said on Thursday the conference had implicitly said Israel could continue its attacks "until Hezbollah is no longer present in southern Lebanon".
"The whole world knows that a Hezbollah victory will mean a victory for international terrorism, which will be a catastrophe for the world and for Israel."
Frank-Walter Steinmeier, the German foreign minister, described Ramon's interpretation as a "gross misunderstanding" of the outcome of the conference.
"I would say just the opposite - yesterday in Rome it was clear that everyone present wanted to see an end to the fighting as swiftly as possible."
Erkki Tuomioja, the Finnish foreign minister, whose country holds the European Union presidency said in Tel Aviv that the Israeli view was "totally wrong."
"The whole basic idea of the Rome conference was to very quickly help end the war and hostilities.
"Without a doubt, there were diverging views in Rome, but most of the countries, including the European Union, also specifically want an immediate halt to the hostilities."
The conference failed to reach agreement on calling for a ceasefire between Israel and Hezbollah, instead agreeing to work towards a ceasefire.
Ramon made his remarks before an Israeli security cabinet meeting on the crisis.
At the meeting, the Israeli government continue its limited incursions into Lebanon rather than launch a bigger ground offensive, an Israeli political source said.
The meeting took place after nine soldiers were killed in south Lebanon on Wednesday, the heaviest loss the army has suffered in 24 hours since the war began.
The Israeli army will continue to
make limited ground incursions
"It was decided to continue the offensive with the same strategy, using pinpointed ground incursions and air strikes, not to bring in massive forces," the source said.
"At the moment the army is not bound by time, it can act as long as needed."
Israel Radio said ministers made it clear that they had no intention of widening the conflict to confront Syria, which backs Hezbollah.
A statement from the prime minister's office said the security cabinet had authorised the call-up of more reserve troops.
"The cabinet has decided ... to mobilise reserve units to reinforce the military potential and capacity in the face of Hezbollah in Lebanon," the statement said.
Israel says it is trying to push Hezbollah back from the border and end rocket attacks on the north of the country.
European Union officials and diplomats met on Thursday to discuss plans to help Lebanon and whether any EU nations would be prepared to join a peacekeeping force there.
Officials said many countries remain cool on the proposed force, only Germany, Italy and non-EU member Turkey have voiced support for contributing to a mission.
Finland, which holds the rotating EU presidency, is leading the meetings in Helsinki and at the EU headquarters in Brussels.