Israeli media said up to 13 soldiers had been wounded. A military spokesman in Tel Aviv would confirm only that several soldiers were wounded and troops were continuing to face resistance in the border town.

"There are still exchanges of fire in Bint Jbeil ... They're putting up resistance and the fighting is continuing," the spokesman said.

Israeli commanders and UN peacekeepers had said on Tuesday that Bint Jbeil - 4km inside Lebanon - had been captured.

But Hassan Nasrallah, the Hezbollah leader, said in a television broadcast on Wednesday that the town - home to 4,000 people - was not in Israeli hands.

"They do not control Bint Jbeil. All the city of Bint Jbeil is still in the hands of the resistance," he said.

The Israeli army estimates that it has killed up to 30 fighters in the battle for what Israel considers a Hezbollah stronghold.

Until the latest fighting, nine Israeli troops had been killed in fighting inside southern Lebanon.