The militant group has built bunkers and tunnels near the Israeli border to shelter weapons and fighters, and its members easily blend in among civilians.
Egeland was speaking to reporters at the Larnaca airport in Cyprus late Monday after a visit to Lebanon on his mission to coordinate an international aid effort. On Sunday he had toured the rubble of Beirut's southern suburbs, a once-teeming Shiite district where Hezbollah had its headquarters.
During that visit he condemned the killing and wounding of civilians by both sides, and called Israel's offensive "disproportionate" and "a violation of international humanitarian law."
On Monday, he had strong words for Hezbollah, which crossed into Israel and captured two Israeli soldiers on July 12, triggering fierce fighting from both sides.
"Consistently, from the Hezbollah heartland, my message was that Hezbollah must stop this cowardly blending ... among women and children," he said.
"I heard they were proud because they lost very few fighters and that it was the civilians bearing the brunt of this. I don't think anyone should be proud of having many more children and women dead than armed men."
"We need a cessation of hostilities because this is a war where civilians are paying the price," said Egeland, who was heading to Israel.
At least 384 people have been killed in Lebanon, including 20 soldiers and 11 Hezbollah fighters, according to security officials. At least 600,000 Lebanese have fled their homes, according to the World Health Organization.
One estimate by Lebanon's finance minister put the number at 750,000, nearly 20 per cent of the population.
Israel's death toll was at least 40, with 17 people killed by Hezbollah rockets and 23 soldiers killed in the fighting, according to authorities.
During his visit to Lebanon, Egeland issued an urgent call for $150 million (¤118.74 million) to help Lebanon through the next three months.