Two Israeli soldiers and a Spanish peacekeeper were killed on Wednesday in an exchange of fire between Hezbollah and Israel, one of the most violent clashes between the two sides since a 2006 war.
The soldiers were killed when Hezbollah fired five missiles at a convoy of Israeli military vehicles on the frontier with Lebanon.
The peacekeeper, serving with a U.N. monitoring force in southern Lebanon, was killed as Israel responded with air strikes and artillery fire, a U.N. spokesman and Spanish officials said.
Hezbollah said one of its brigades in the area had carried out the attack, which appeared to be in retaliation for a Jan. 18 Israeli air strike in southern Syria that killed several Hezbollah members and an Iranian general.
"Those behind the attack today will pay the full price," Israeli Prime Minister Benjamin Netanyahu warned later on Wednesday, in televised remarks as he met with security chiefs.
The Israeli military confirmed the deaths of the soldiers, saying they had been attacked while driving in unmarked civilian vehicles on a road next to the fence that marks the hilly frontier. Seven other soldiers were wounded.
Andrea Tenenti, spokesman for the United Nations Interim Force in Lebanon (UNIFIL), which employs more than 10,000 troops, said the peacekeeper's death was under investigation.
The U.N. special coordinator for Lebanon urged all parties to refrain from any further detribalization of the situation, while Lebanon's prime minister said his country was committed to the U.N. resolution that ended the 2006 war.
The 80-km (50-mile) frontier has largely been quiet since 2006, when Hezbollah and Israel fought a 34-day war in which 120 people in Israel and more than 500 in Lebanon were killed.
Since the end of the war with Hamas militants in Gaza last year, Israel has warned of frictions on the northern border and the possibility that Hezbollah might dig tunnels to infiltrate Israel. In recent days it has moved more troops and military equipment into the area.
"Statement number one"
A retired Israeli army officer, Major-General Israel Ziv, said he believed Wednesday's assault was an attempt by Hezbollah to draw Israel more deeply into the war in Syria, where Hezbollah is fighting alongside forces loyal to President Assad.
"Israel needs to protect its interests but not take any unnecessary steps that may pull us into the conflict in Syria," he said.
Netanyahu, who faces a parliamentary election on March 17, said Israel was "prepared to act powerfully on all fronts".
He accused Iran of trying to establish a "terror front" via Hezbollah from Syria and said Israel was "acting aggressively and responsibly against this attempt". Iran is a major funder of Hezbollah, a Shi'ite group headed by Hassan Nasrallah.
In a communique, Hezbollah called Wednesday's operation "statement number one", indicating a further response to the Syrian incident was possible. Nasrallah is expected to announce the group's formal reaction to Israel's Jan. 18 air strike on Friday.
In Beirut, celebratory gunfire rang out after the attack, while residents in the southern suburbs of the city, where Hezbollah is strong, packed their bags and prepared to evacuate neighborhoods that were heavily bombed by Israel in 2006.
In Gaza, Palestinian militant groups praised Hezbollah. The United States said it condemned the Shi'ite group's "act of violence" and urged all parties to refrain from actions that could escalate the situation.
With an Israeli election looming and Hezbollah deeply involved in support of Assad in Syria, there would appear to be little interest in a wider conflict for either side.
Regional analysts said they did not expect events to spiral.
"Netanyahu most likely realizes that a prolonged military engagement in Lebanon could cost him the election," said Ayham Kamel and Riccardo Fabiani of the Eurasia Group.
"Instead, Israel will pursue limited actions targeting Hezbollah in Lebanon, but the low-scale, tit-for-tat exchanges will not broaden into a wider war."