Israeli forces took control of the strategic southern hub of Marjayoun yesterday and warned that its fight against Hezbollah could grow wider and more severe if diplomacy fails.
Israel's defence minister, Amir Peretz, said the military would use "all of the tools" to cripple the Islamic guerrillas if attempts for a ceasefire pact collapse at the United Nations.
Israel's leaders have authorised a major new ground offensive going deeper into Lebanon, but held off to give international negotiators more time.
There were clear signals, however, that Israel was already setting its sights on Lebanon's capital and beyond.
In Beirut, Israeli warplanes blanketed the downtown area with leaflets that threatened a "painful and strong" response to Hezbollah attacks and warned residents to evacuate three southern suburbs.
Other warnings dropped from planes said any trucks on a key northern highway to Syria would be considered targets for attack.
Earlier, missiles from Israeli helicopter gunships blasted the top of a historical lighthouse in central Beirut in an apparent attempt to knock out a broadcast antenna for Lebanese state television.
The seizure of the southern town of Marjayoun and nearby areas overnight appeared to be an attempt to consolidate bases in southern Lebanon before any possible push northward. It gives Israel an important foothold for any deeper drives into the country.
Marjayoun - a mostly Christian city about five miles from the Israeli border - was used as the command center for the Israeli army and its allied Lebanese militia during an 18-year southern Lebanon occupation that ended in 2000.
The high ground around Marjayoun, including the village of Blatt, overlook the Litani River valley, one of the staging sites for the relentless Hezbollah rocket assault on northern Israel.
Israel suffered its worst one-day military losses on Wednesday, with 15 soldiers killed, most of them in other areas of the south away from the Marjayoun area.
Taking command of Marjayoun was not considered a key battlefield victory since the city gives little support to Hezbollah. But reaching the site passed through Hezbollah country and was the scene of fierce fighting.
Hezbollah claimed it destroyed 13 Israeli tanks. Israel did not immediately give a tally of its losses.
Israeli gunners used their new vantage points as pay-back: pounding Hezbollah-led areas such as the plain around the nearby town of Khiam, which has been used as a rocket site for the militants.
Still, Hezbollah was defiant. It fired 110 rockets into northern Israel mid-afternoon.
More than 800 people in Lebanon and Israel have died since fighting erupted.