In a televised speech, Hizbollah leader Sayyed Hassan Nasrallah warned Israel on Thursday it would fire rockets at Tel Aviv if Israel targeted central Beirut, but offered to stop its rocket barrage if Israel ended attacks on civilian areas in Lebanon.
"(If) at any time you decide to stop your campaigns on our cities, suburbs, civilians and infrastructure, we won't strike with rockets any settlement or Israeli city...," Sayyed Hassan Nasrallah said in a taped televised message.
"If you strike Beirut, the Islamic Resistance will strike Tel Aviv and it is able to do so," Nasrallah said, in the first apparent confirmation that Hizbollah has longer-range missiles capable of hitting the city 130km from the border.
Lebanese Prime Minister Fouad Siniora said the war had killed 900 people in Lebanon and wounded 3,000, with a third of the casualties children under 12. He said a million Lebanese, a quarter of the population, had been displaced and infrastructure devastated. The Reuters tally of Lebanon deaths is at least 685.
Sixty-seven Israelis have been killed in the war including 40 soldiers. Al Arabiya television said a fourth soldier was killed on Thursday but there was no official confirmation.
The Israeli army has carved out a "security zone" of 20 villages in south Lebanon up to six km from the border and will stay until an international force arrives, Israeli television said.
The United States, France and Britain hope for a UN Security Council resolution within days that would call for a truce and maybe strengthen existing UN peacekeepers until a more robust force can be formed, UN officials said.
The US State Department said it still hoped for an agreement by Friday on a resolution to end the fighting.
Israeli forces killed five Palestinian gunmen and three civilians, including a 10-year-old boy, in the Gaza Strip on Thursday, witnesses said. Israel's offensive in the Strip, which it quit last year, has cost at least 161 Palestinian lives. Israeli aircraft launched strikes on 70 targets in southern Lebanon and Beirut overnight.