ISRAELI air strikes on Lebanon killed 58 civilians and a Hezbollah fighter, the deadliest toll of the eight-day-old war, as thousands of villagers fled north and more foreigners were evacuated.
Hezbollah rockets killed two children in the northern city of Nazareth, medics said. More Hezbollah rockets fell on the city of Haifa and one hit an empty seafront restaurant.
Israeli troops crossed the border to raid Hezbollah posts and the Israeli army said two of its soldiers were killed and nine injured in fighting with Hezbollah guerillas.
The two children were Israeli Arabs, killed as they played outside a house.
"We heard a very large explosion and then windows shattered," resident Salah Hushaf told Israel's Channel 2 Television. "We saw two children killed."
Panicked but also curious, residents poured into the streets after several rockets slammed into the city, 45km south of the Lebanese border. One hit a house.
"Leave the area, more attacks are expected!" police shouted as firefighters fought a blaze caused by one missile. "Go home and take your children!"
The killing of the children, aged three and seven, raised Israel's civilian death toll from Hezbollah rocket attacks to 15. At least 14 Israeli troops have also been killed since Hezbollah launched a cross-border raid a week ago.
Israeli military strikes against Hezbollah and Lebanese targets have killed at least 297 people in Lebanon.
"After the rockets killed the two children, the situation is tense and people are tense. We are trying to calm them down," said an emotional Ali Salaam, deputy mayor of Nazareth.
"We appeal to the entire world to intervene to stop this war."
Nazareth is home to the Church of the Annunciation, built above a sunken grotto where, according to Roman Catholic tradition, the angel Gabriel told the Virgin Mary she was to bear Jesus. It is one of the farthest towns hit by Hezbollah.
About 20 per cent of Israel's population are Arab.
Despite international concern, there was no sign Israel or its Lebanese Shi'ite foes were ready to heed the Beirut Government's pleas for an immediate halt to a war that has killed at least 294 people in Lebanon and 29 in Israel.
Lebanese Prime Minister Fouad Siniora said more than 500,000 people had been displaced and appealed for international help.
"I call on you to respond immediately and without reservation to our call for a ceasefire and to provide urgent international humanitarian aid," he said in a televised address.
Israeli Prime Minister Ehud Olmert said the bombardment would last "as long as necessary" to free two soldiers captured by Hezbollah on July 12 and ensure its militants are disarmed.
Hezbollah, backed by Syria and Iran, wants to swap the two Israeli soldiers for Lebanese and Palestinians in Israeli jails.
At least 17 Lebanese, including several children, were killed and 30 wounded in an Israeli air strike that destroyed houses in the southern village of Srifa, residents said.
"There was a massacre in Srifa," said the village's mayor, Afif Najdi. Rescuers were still looking for bodies.
At least 41 other civilians were killed in air strikes that hammered other parts of south and east Lebanon, security sources said. Hezbollah said one of its fighters was killed.
Israel also bombed the runway at Beirut international airport, which has been closed since last week. The runway and fuel tanks have been hit several times.
Israeli planes also bombed a base of the Syrian-backed Popular Front for the Liberation of Palestine in the Bekaa, the PFLP said. The guerilla group gave no word on casualties.
Many villagers in southern Lebanon said food, water and medical supplies were dwindling after roads and bridges were cut in the south, restricting movement of aid.
The United Nations Children's Fund appealed for $US7.3 million ($9.79 million) to meet the immediate needs of women and children.