Israeli Prime Minister Benjamin Netanyahu vowed to push deeper into Lebanon after his military took over the medieval castle of Beaufort on Sunday, calling it a "dramatic shift" in the campaign against Hezbollah.
The Iran-backed militant group, meanwhile, said it targeted Israeli forces near the fortress as well as army positions and infrastructure in Shlomi and Nahariya in northern Israel, while air raid sirens blared in the Acre area.
As fighting escalated in Lebanon, diplomatic sources told AFP that the United Nations Security Council would hold an emergency meeting Monday over Israel's expansion of its offensive in the country.
The meeting was requested by France, whose President Emmanuel Macron said "nothing justifies the major escalation under way in south Lebanon", calling for an end to fighting "for good".
Lebanon was dragged into the Middle East war on March 2 when Hezbollah fired rockets towards Israel in retaliation for the US-Israeli killing of Iran's supreme leader.
A truce to halt the fighting between Israel and Hezbollah began on April 17, but has never been observed. Both sides accuse each other daily of violating the ceasefire and justify their attacks by the other's alleged breaches.
Military delegations from Lebanon and Israel held security talks in Washington on Friday, with more US-brokered negotiations planned next week.
Israeli forces used the Beaufort castle, also known as Qalaat al-Chakif, as a base during their previous two-decade occupation of southern Lebanon that ended in 2000.
In a video statement released after the military took Beaufort, Netanyahu said "we have returned united, determined and stronger than ever".
"Now my directive is to deepen and expand our hold in places that were under Hezbollah's control. The capture of Beaufort is a dramatic stage and a dramatic shift in the policy we are leading."
Hezbollah lawmaker Hassan Fadlallah said Beaufort is "a national archaeological site... and was not a military site for the resistance", adding the raising of the Israeli flag there "should provoke the feelings of every loyal patriot".
Shelling was audible and smoke rose from the surrounding area as AFP saw the Israeli flag above the castle.
Israeli Defence Minister Israel Katz said troops had captured the historic strongpoint, which commands sweeping views of south Lebanon, as they expanded their ground operations.
"Forty-four years after the heroic Battle of Beaufort, and on this day commemorating the soldiers who fell in the First Lebanon War (1982), our troops have returned to the summit of Beaufort and once again raised the Israeli flag there," Katz said.
In a shelter for the displaced in Sidon, southern Lebanon's largest city, Zeinab Fakih, from Nabatieh, told AFP "we are afraid".
"It is impossible for us to return to our home, because the city is in great destruction," she said, adding that the arrival of Israeli forces at the castle was "tragic".
Issa Tfaily, also displaced from Nabatieh, said: "We will return... if not today, then tomorrow, as long as there is resistance."
The push to Beaufort came as the Israeli military issued a sweeping evacuation order to areas south of the Zahrani River, north of the Litani and around 40 kilometres (25 miles) from the border.
It later said it had targeted "dozens of Hezbollah infrastructure sites since this morning" in the Tyre area and other parts of southern Lebanon, while Lebanon's state-run National News Agency reported a series of strikes on the area.
An Israeli strike near a hospital in Tyre wounded 13 staffers, the Lebanese health ministry said.
An AFP correspondent in the city saw levelled buildings and rescuers operating at the scene.
Another correspondent said the strikes were the strongest on the city since the war started.
A few thousand people remain in Tyre's small old city, spared from Israeli evacuation warnings, some sleeping in their cars.
In Sidon, an AFP photographer saw civil defence teams from the Tyre region reach the city after Israel's military called them to evacuate.
Ali Safieddine, civil defence head in Tyre city, said they have "temporarily relocated to Sidon".
The Israeli army said a Hezbollah explosive drone killed one of its soldiers Saturday, bringing to 25 the number of Israeli military deaths in Lebanon since early March.
It added that "since the start of the ceasefire, 900 Hezbollah terrorists have been eliminated".
Lebanon's health ministry says Israeli attacks have killed more than 3,412 people since early March.