The escalation prompted Lebanon to take action toward lodging a complaint with the United Nations over Israeli attacks on the south of the country including the killing of the Hezbollah fighter.

Two Israeli soldiers were killed during exchanges of fire with the radical Hezbollah Shia militia across the border with Lebanon, the army announced.

"There was a deliberate attack by Hezbollah snipers on a Tshahal (army) position in the western area of the border. Two soldiers have been killed," Captain Jacob Dallal told AFP.

"The army has responded to the shooting," he added.

Hezbollah had earlier said one of its fighters was killed in Israeli strikes on Lebanon during the violence which erupted the day after a military commander of the radical Shia Muslim group was killed in a car bomb blamed on Israel.

Foreign Minister Jean Obeid gave instructions to Lebanon's UN envoy to hold consultations "on the possibility of calling a special Security Council meeting to condemn the Israeli aggressions," his ministry said.

Israeli combat helicopters carried out three raids, firing a total of eight rockets on Hezbollah "monitoring posts" at the outskirts of the border villages of Aita Shaab and Blatt, Hezbollah and police sources said.

An Israeli tank also opened fire on a Hezbollah monitoring post near Aita Shaab, killing one fighter, said a statement by the Islamic Resistance, the group's military arm.

"The Islamic Resistance will choose the suitable time and place for a deterrent response that will make the enemy understand that any aggression against our people ... will be very costly," it said.

Hezbollah chief Sheikh Sayyed Hassan Nasrallah vowed to "cut the hand" of Israel on Monday after blaming it for a Beirut car bomb attack which killed Ghaleb Awwali, a member of the movement's military wing who had been working as part of a team providing assistance to the Palestinians.