Israeli ground troops entered southern Lebanon on Wednesday to search for two soldiers captured by Hizbollah, which demanded Israel release prisoners held in Israeli jails and guarantee their safe return, said the report.

Israeli troops traded fire with Hizbollah militia across the border after at least two rockets fired by Hizbollah hit northern Israel, wounding four Israelis.

Israeli tanks then shelled Hizbollah strongholds and its military aircraft pounded bridges and a power plant in southern Lebanon.

At least two Lebanese civilians and seven Israeli soldiers have been killed in the clashes between the two sides. Israeli Prime Minister Ehud Olmert have said the Hizbollah attack was an "act of war", vowing to launch a "very painful and far-reaching" response.