Hezbollah pounded Israeli positions on the slopes of Mount Hermon with dozens of mortar rounds and 107 mm Katyusha rockets in a sustained attack that lasted nearly three hours, Lebanese police told AFP.

An AFP correspondent saw a large cloud of black smoke rising from one Israeli position, known as Radar, that was targeted around 30 times. Two other army posts also came under fire.

Two mortar rounds landed in the adjacent Golan Heights, a Syrian territory which Israel captured in the 1967 Arab-Israeli war.

Israeli warplanes hit back against suspected Hezbollah positions across the border, firing 14 missiles at seven separate targets, said witnesses.

Israeli artillery also fired some 60 shells on the outskirts of eight border villages, Lebanese police said without reporting any casualties.

Israeli helicopter gunships combed the region's wooded valleys, looking for Hezbollah fighters, while warplanes overflew the Bint Jbeil region further west, prompting Hebollah anti-aircraft fire.

Major General Beni Gantz, head of Israel's northern command, said the Israelis had sustained no casualties in the exchanges, which he said lasted for around an hour, although several houses in a local Druze village were damaged in the attack which he said would have taken place with the knowledge of Syria.

"Hezbollah opened fire on our area with several dozen shells and anti-tank (rockets) and some form of rocket," Gantz told AFP. "A few shells fell by northern sides of the Golan Heights."

Gantz would not give details of the size of the force used by Israel in response to the attacks but confirmed that helicopter gunships and warplanes had been involved around the disputed Shebaa Farms border region which also lies close to Syria.

The Shiite Hezbollah said it had carried out its dawn onslaught in retaliation for the death of one of its militants in a Beirut car bomb blast last week.

The unit which carried out the attack was named the "Martyr Ali Saleh forces" after the slain militant, it said.

The 42-year-old, said by Lebanese police to have worked as a driver at the Iranian embassy, was killed in Beirut's Shiite southern suburbs on August 2 in an attack which Hezbollah vowed to avenge.

Lebanese Information Minister Michel Samaha agreed with Hezbollah that the blast was an "Israeli terrorist operation".

The Shiite Muslim militant group has vowed to press its armed campaign against Israel until all Lebanese territory has been freed.

The Israeli army maintained its occupation of the Shebaa Farms area when it pulled out of south Lebanon in 2000. The area was captured from Syria in 1967, but is now claimed by Lebanon with Syria's blessing.

A senior Israeli official close to Prime Minister Ariel Sharon said the attacks may reflect "the frustration of Hezbollah and its foreign backers" at the relative downturn in attacks against Israel since Palestinian groups called a ceasefire on June 29, the official said.

Both Iran and Syria provide backing to Hezbollah with Lebanese approval. In recent months Syria has come under huge US pressure to end its support.

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