The Israeli military said seven soldiers have been killed in combat a day after the start of a ground incursion into southern Lebanon.
The military has also warned people to evacuate around 50 villages and towns across southern Lebanon.
The warning on Wednesday came days after the military launched what it said were limited ground operations near the border to combat the Hezbollah militant group.
The villages are in a UN-declared buffer zone established after Israel and Hezbollah fought their last war in 2006.
Hundreds of thousands of people have already fled their homes as the conflict has intensified, with the Middle East moving closer to a long-feared regional war the day after Iran fired a barrage of missiles at Israel.
The escalation on multiple fronts has raised fears of a wider war in the Middle East that could draw in Iran – which backs Hezbollah and Hamas – as well as the United States, which has rushed military assets to the region in support of Israel.
Hezbollah, widely seen as the most powerful armed group in the region, said its fighters clashed with Israeli troops in two places inside Lebanon near the border. The Israeli military said ground forces backed by air strikes had killed militants in “close-range engagements”, without saying where.
The Israeli military also announced its first combat death since the start of the latest operations, saying a 22-year-old captain in a commando brigade had been killed in combat in Lebanon.
The Israeli military has warned people in around 50 villages and towns to evacuate.
Israel said it intercepted many of the missiles fired by Iran, and officials in Washington said US destroyers had assisted in Israel’s defence.
Iran said most of its missiles hit their targets. There were no immediate reports of casualties.
In a separate development, Hezbollah said its fighters clashed with Israeli troops in the Lebanese border town of Odaisseh, forcing them to retreat.
There was no immediate comment from the Israeli military or independent confirmation of the incident, which would mark the first ground combat since Israeli troops crossed the border this week.
Israeli media reported infantry and tank units operating in southern Lebanon after the military sent thousands of additional troops and artillery to the border.
Hundreds of thousands have already fled their homes as the conflict has intensified.
On Tuesday, Israeli Prime Minister Benjamin Netanyahu vowed to retaliate over the barrage against Iran, which he said “made a big mistake tonight and it will pay for it”.
An Iranian commander threatened wider strikes on infrastructure if Israel retaliates against Iran’s territory.
The United Nations Security Council has called an emergency meeting for Wednesday to address the spiralling conflict.
Israel and Hezbollah have traded fire across the Lebanon border almost daily since October 8, the day after Hamas’ cross-border attack on October 7 2023, which killed 1,200 Israelis and took 250 others hostage.
Israel declared war on the militant group in the Gaza Strip in response.
More than 41,000 Palestinians have been killed in the territory, and just over half the dead have been women and children, according to local health officials.
German Chancellor Olaf Scholz has called on Iran and Hezbollah to stop their attacks on Israel and says Tehran is risking a wider regional conflagration.
Mr Scholz issued a statement on Wednesday strongly condemning Iran’s missile barrage against Israel the previous evening.
He said that “with this, Iran is risking setting the whole region on fire — that must be prevented under all circumstances. Hezbollah and Iran must cease their attacks on Israel immediately”.
The Chancellor added that Germany will continue to push for a ceasefire between Israel and the Hezbollah militant group, which he said must lead toward full implementation of a UN Security Council resolution that calls for Hezbollah to withdraw from the area near the Israeli border.
Mr Scholz said that would “clear the way for people to return to the north of Israel and at the same time open a prospect of consolidating Lebanon’s statehood”.