Nasrallah joined hundreds of thousands of Hezbollah supporters who filled the devastated southern suburbs of Beirut on Friday with a sea of yellow flags to celebrate "divine victory" in their month-long war against Israel.
"The resistance today has more than 20,000 rockets. The resistance is today stronger than on July 12 [the outbreak of the hostiltities] ... and stronger than ever before," he said.
One of Israel's stated aims in the offensive was to eliminate Hezbollah's capacity to fire rockets, thousands of which were fired at the country during the conflict.
Nasrallah last appeared in public at a news conference on July 12 when he announced the capture of two Israeli soldiers by Hezbollah fighters, an act which led to the Israeli attacks.
The assembled crowd, which Hezbollah's Al-Manar television said was in the hundreds of thousands, was swollen by Amal supporters waving the green flags of the sometime rival but more recently allied movement.
Supporters arrived from across Lebanon, with many setting off for the capital on Thursday by car and on foot from Shia villages in the south of the country, an area badly damaged in the Israeli offensive.
No weapon handover
Nasrallah said his fighters will give up their weapons only when "Israel's threats" end and the Lebanese government is strong enough to protect the country.
"We will not give up our arms in a weak Lebanese state incapable of defending itself from the threat of Israel," Aljazeera quoted him as saying on Friday.
"There is no army in the world that can [force us] to drop our weapons from our hands, from our grip.
"We will not release the two captured Israeli soldiers except in an exchange for Lebanese prisoners.
Friday's rally was supposed to
coincide with Israel's full pullout
"We do not want to keep our arms for ever. We do not say that our arms are forever, and this is not logical. It has to end.
"But any word on disarming the resistance under this state, this authority, this regime and this current situation means keeping Lebanon under the risk of having Israel killing and bombarding at will."
'Strong, just state'
Aljazeera further quoted Nasrallah as saying "let us build a strong and just state", and calling for a new Lebanese government of national union.
"We are sticking to and calling for establishing a state but we will never let anyone to insult us.
"The time of victory has begun and the time of defeats has gone."
The Hezbollah chief strongly criticised, albeit indirectly, the anti-Syrian Druze leader Walid Jumblatt, who is a key government ally, and demanded that he apologise for his past statements.
Fuad Siniora, Lebanon's prime minister, was absent from the event and Aljazeera's Beirut correspondent said many people shouted anti-Siniora slogans, urging him to resign.
The atmosphere at the rally was said to be happy and festive.
Muhammed Hajj Hussein, 50, said: "Today is a holiday for Lebanon and I have never felt more happy. I am very happy for the victory of the resistance."
A supporter at Friday's Divine
Victory rally in Beirut
Hasan Slyman said: "This is a victory for Lebanon and the Islamic world. I'm very proud and hope the international community will now act against Israeli violations and incursions into our airspace."
Ali Sahhar said: "Everyone thought the Israeli army was unbeatable, this wasn't true and today we are declaring the victory the resistance achieved."
The rally had been expected to coincide with the final withdrawal of Israeli soldiers from southern Lebanon, but Israel's army chief said on Wednesday there were "a few issues to be wrapped up" before the pullout could be completed.
Israeli forces have been gradually pulling out from territory they captured in fighting which killed nearly 1,200 people in Lebanon, mostly civilians, and 157 Israelis.
Hezbollah has declared victory in the war, during which it fired nearly 4,000 rockets into northern Israel.
Earlier, Nasrallah said on the group's Al-Manar Television: "I call on you all to participate in a victory rally, your victory ... in the southern suburb, the suburb of honour, glory, faith, steadfastness and victory for the whole country.
"Let us renew our covenant and declare our joy at the divine victory to the whole world."
Under the terms of a truce which ended the fighting last month, UN and Lebanese army forces are deploying in the south to monitor the ceasefire and try to assert the authority of the Beirut government.
Lebanese youths wave flags in
support of Hezbollah
But Nasrallah has said his fighters remain on the border with Israel and Hezbollah has dismissed demands that it disarm.
Earlier, Ehud Olmert, the Israeli prime minister, declined to say if the Hezbollah leader would be attacked if he appeared at the rally.
"And you think, that if he was, I would tell you - and tell him?" he told Israel's Channel 10 television on Thursday.