Hezbollah chief Hassan Nasrallah in a televised address on Wednesday threatened Cyprus in the event that total war erupts in the region.
"Opening Cypriot airports and bases to the Israeli enemy to target Lebanon would mean that the Cypriot government is part of the war, and the resistance will deal with it as part of the war," he said, referring to Hezbollah.
The government in Nicosia swiftly denied any Cyprus military involvement in Israel's war against Hezbollah ally Hamas.
"Cyprus is not involved, nor will it become involved, in any military conflicts," government spokesperson Konstantinos Letymbiotis told state radio on Thursday.
He called Nasrallah's comments "not pleasant", adding that "all necessary diplomatic steps will be taken".
The island is home to two British military bases, but these are on sovereign UK territory and not controlled by the Cyprus government.
The British Akrotiri airbase on the south coast has been used by the Royal Air Force which has joined the US Air Force in targeting Huthi rebels in Yemen who have attacked shipping in the Red Sea and Gulf of Aden.
The Huthis say they are doing so in solidarity with the Palestinian Hamas movement.
Over the past decade, Cyprus has built stronger ties with Israel, particularly in the search for new energy sources and in tourism.
Cyprus is the European Union's easternmost member, and is less than 200 kilometres (125 miles) from Lebanon.
- 'Part of the solution' -
President Nikos Christodoulides has denied there has been any Cypriot involvement in the Israel-Hamas war except as "part of the solution" as a staging post for humanitarian aid to the Gaza Strip via a maritime corridor.
"Cyprus is not part of the problem. As it is widely acknowledged, its diplomatic footprint is part of the solution," government spokesman Konstantinos Letymbiotis added in a separate written statement on Thursday.
"Any public allegations that refer to an involvement of Cyprus through its infrastructure or its territory in the event of a confrontation that relates to Lebanon are totally groundless," the statement said.
"Cyprus has never facilitated and will not facilitate any aggressive action or attack against any country."
On the street, reactions to the Hezbollah leader's remarks were mixed.
"It's a very tense moment all over the world," Brazilian tourist Glaussia, 54, told AFP, not giving her last name.
She added that it was important that "everybody make an effort for peace".
Nicosia resident Costas stressed that his country's only involvement in the current conflict was to provide "humanitarian help to the people over there".
He said the government would not become involved in the war in any military capacity.
"Cyprus is a credible enabler of stability, and an acknowledged regional hub for humanitarian operations, based on excellent relations with all the countries in the region," government spokesman Letymbiotis said in his statement.
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