Two Israeli jets fired six air-to-surface missiles on hills on the outskirts of Kfar Chouba, a small farming village near the disputed Chebaa Farms. Israeli artillery also shelled suspected guerrilla positions in areas near the farms.
The Israeli action followed Hezbollah guerrillas firing mortar shells and rockets on Israeli outposts in the same vicinity. Hezbollah issued a statement in Beirut, saying its guerrillas scored "direct hits" in the early evening attack on the three outposts.
An Israeli army spokesman confirmed the Hezbollah attacks and Israeli retaliations. There were no immediate reports of casualties from both sides.
Earlier Thursday, Lebanese army anti-aircraft gunners fired at Israeli warplanes flying reconnaissance missions over southern and Mount Lebanon, an army statement said. No hits were reported.
The fighting to Israel's north has intensified in recent days, even as Israel's anti-terror sweep in Palestinian territories heated up. Israel and the United States have accused Hezbollah of trying to open up a new front in the conflict, a charge Lebanon has denied.
Israel pulled out of two dozen small towns and villages in the West Bank on Thursday, but took over other Palestinian areas, sending mixed signals ahead of a truce mission by U.S. Secretary of State Colin Powell. U.S. officials told CBS News that the Israeli offensive will probably continue well into next week.
Israeli Prime Minister Ariel Sharon has said he would not withdraw troops until Palestinian militias have been crushed. The military said it has arrested 4,185 Palestinians so far in its offensive nearly double the figure announced two days earlier. Of those taken into custody, 121 were on Israel's wanted list, the military said.
In the mean time, Yasser Arafat, humiliated by an Israeli flag hanging outside the shell-shattered headquarters he cannot leave and presiding over a Palestinian Authority in shambles, is fast becoming the hero he hasn't been since returning from exile in 1994. Palestinians, who long have complained of Arab world apathy toward their plight, have seen enormous outpourings of support since Arafat's headquarters came under siege. From Baghdad to Cairo, portraits of Arafat are held aloft by thousands shouting their willingness to die for him.
In video footage taken in the compound Wednesday, Arafat appeared subdued, listening quietly to reports by senior advisers. His trademark stubble had grown into a beard and Arafat wore a pistol tucked into his khaki pants.
Powell, who will be visiting Amman, Jordan, before arriving in Jerusalem later Thursday, spoke to Sharon by telephone. The two discussed topics including Powell's planned meeting on Saturday with Palestinian President Yasser Arafat, who is still trapped in his office in Ramallah, surrounded by Israeli troops.
Later Thursday, Powell said "I am proud to be going, I am pleased to be going ... to get the sides back on track. ... My mission is still on. I'm not concerned about it."
The Bush administration has repeatedly pressured Sharon to order a withdrawal of troops from Palestinian areas, but Sharon is holding his ground on continuing a military operation he has said must not end until Palestinian militant groups are "crushed."
"I hope our great friend the United States understands that this is a war of survival for us," said Sharon. "It's our right to defend our citizens and there should be no pressure put on us not to do that."
Sharon added: "We are doing what President Bush said should be done against terror. Once we have done that, we are not going to stay here (in Palestinian areas). But first of all, we have to accomplish our mission."
In the Jenin refugee camp, scene of the deadliest fighting in Israel's two-week offensive, three dozen armed men, apparently the last holdouts, surrendered to Israeli troops Thursday.
In other army operations, Israeli troops entered the West Bank towns of Dahariyah and Bir Zeit and the Ein Hilmeh refugee camp Thursday and carried out arrest sweeps.
Israel and the United States appeared at odds over two key issues - the speed of the Israeli pullback and the role of Palestinian leader Yasser Arafat, who has been confined to a few rooms in his West Bank headquarters for the past two weeks.
Sharon has branded Arafat a terrorist, and has suggested he will have no more dealings with him. However, Powell said Wednesday that Arafat "is the partner that Israel will have to deal with."
Powell's meeting with Arafat on Saturday was decided on despite Sharon's comment that he would consider such a meeting to be a "tragic mistake."
The secretary of state has floated the idea of sending American truce monitors to the region. Israel's Cabinet secretary, Gideon Saar, said Thursday that Israel had no problem with the proposal, but strongly objects to the deployment of an international force.
Israeli troops and tanks rolled into West Bank towns on March 29 in a massive offensive triggered by Palestinian suicide bombings that have terrorized Israel. The fighting has slowed the pace of such attacks, but not halted them.
On Wednesday, a suicide bomber from the Islamic militant group Hamas blew himself up on a bus near the northern Israeli port city of Haifa, killing himself and eight passengers. Hamas identified the bomber as a 22-year-old resident of the Jenin refugee camp.
On Thursday, a Palestinian man was killed when explosives he was carrying went off prematurely, near a taxi stand in the West Bank town of Hebron. Several bystanders were injured.
The partial Israeli pullback drew praise from the Bush administration, which also repeated a demand that Arafat and other Arab leaders help crack down on terrorism.
"The burden isn't Israel's alone. All parties have responsibilities," White House spokesman Ari Fleischer said in Washington.
In a related development, an explosion Thursday at a synagogue on the Tunisian island of Djerba left several people injured, hospital officials said. The source of the blast remained unclear. Hospital officials in the North African nation said there were "several victims" but did not say whether anyone had died. Further details were unavailable, said the hospital officials, who spoke on condition of anonymity.