Bbc-Two Israeli soldiers and a Spanish UN peacekeeper have been killed as Hezbollah militants traded fire with Israeli forces on the Lebanese border.
After Israeli forces were hit by missile fire, they responded by firing shells into southern Lebanon.
The UN Security Council is to discuss the fighting at an emergency meeting called by France in New York.
A senior UN official on the ground in Lebanon urged “maximum restraint to prevent an escalation”.
Israeli Prime Minister Benjamin Netanyahu held an emergency security meeting and said the attackers would “pay the full price”.
The cross-border violence erupted when Israeli military vehicles were struck by anti-tank missiles at about 11:35 (09:35 GMT) near Mt Dov, in the Shebaa Farms area, a tract of land where the borders of Israel, Lebanon and Syria meet.
Two soldiers died in the attack. Hezbollah said it was retaliation for an Israeli air strike that killed six of its fighters and an Iranian Revolutionary Guards general in the Syrian Golan Heights 10 days ago.
Air and ground
Seven other Israeli soldiers were injured, two of them moderate.
Just over an hour later, mortars hit an Israeli military position on Mt Hermon, prompting troops to close the site and evacuate civilians from a ski resort in the area.
Israel struck back with combined aerial and ground strikes on Hezbollah operational positions along the border, the military said.
At least 50 artillery shells were fired at the villages of Majidiyeh, Abbasiyeh and Kfar Chouba, according to Lebanese officials.
Later, the UN Interim Force in Lebanon announced that one of its peacekeepers had been killed close to the Shebaa Farms area.
The defence ministry in Madrid identified the dead man as a Spanish soldier who had been at a position near the village of Ghajar.
The UN special co-ordinator for Lebanon, Sigrid Kaag, expressed “deep concern over the serious deterioration of the security situation” and “urgently called on all parties to refrain from any actions that could destabilise the situation further”.
Edmond Mulet, assistant secretary-general for UN peacekeeping operations, is to brief the Security Council in closed consultations.
