The exercises include bombings, missile strikes and operations using chemical and bacteriological weapons.
The Israeli manoeuvres are considered to be the largest and most significant since the 2006 war with the Lebanese Shia group Hezbollah, according to Israeli media sources.
Israeli forces and Hezbollah fighters fought a 34-day war in the summer of that year.
More than 1,200 people were killed on both sides, most in Lebanon, according to UN, Israeli and Lebanese officials.
The Israeli cabinet is expected to hold a special session as part of the emergency exercises along with meetings of the mini-cabinet for political and security affairs.
Ehud Barak, the Israeli defence minister, said Israel was not willing to see a deteriorating situation at its northern borders, as the region was volatile.
His deputy, Matan Vilnai, said the drill was meant to help Israel apply lessons from its 2006 war, during which Hezbollah fighters fired hundreds of conventional rockets into Israel.
For his part, Ehud Olmert, the prime minister, sought to reassure Syria and Lebanon that Israel did not want the drill to worsen tensions along its northern border.
"The goal of the exercise is to check the authorities' ability to carry out their duties in times of emergency and for preparing the home front for different scenarios," Olmert told a weekly cabinet meeting on Sunday.
"There is nothing else hidden behind it. All the reports on tension in the north can be moderated and cooled down."
Olmert said "we have no secret plans" behind the exercises.
But across the border, where the Lebanese army and the Unifil force deployed after the 2006 war have been put on alert in view of the exercises, his assurance met with rejection.
Sheikh Naim Kassem, the group's deputy leader, said the military exercises are intended to prepare for a new war on Lebanon.
Read to defend
Giving the warning, Kassem told a rally south of Beirut that Hezbollah is fully ready to defend Lebanon if Israel attacks again.
"These drills are part of preparations for war because Israel is always in a warlike situation," he said.
"These manoeuvres are part of preparations for something in the future - probably it could be far off - but it is a preparation for war."
Kassem said the Israeli drills were also intended "to raise the collapsing morale of the people inside Israel following the defeat in the 2006 war".