Israel has confirmed a major breach of the ceasefire.
It has sent two commando units deep into Eastern Lebanon.
Three Hizbollah fighters have been killed, according to Lebanese officials. Israel has also suffered heavy casualties.
Their helicopters pulled troops out after coming under heavy fire.
The Israelis were driving in two vehicles in Eastern Lebanon, when they were spotted and ambushed by the Hizbollah fighters. They were on their way to kill Hizbollah official Sheikh Mohammed Yazbek in the village of Bodai.