The Israeli military fired a barrage of shells into southern Lebanon in retaliation after five Katyusha-style rockets were launched against the Jewish state on Sunday, officials said.
The attacks struck uninhabited areas of both Israel and Lebanon without causing any casualties or damage, officials on both sides said.
"About 20 shells from Israeli territory have struck the border region of Arqub after the launch of rockets against Israel this morning," a Lebanese security official told AFP.
The shelling came in response to two Katyusha-style rockets fired from Lebanon that struck an open field west of the town of Kyriat Shmona, Israeli military radio reported.
"Artillery responded to rocket attacks from Lebanon against Israel that left no victims, targeting the area where these projectiles were fired from," an Israeli army spokesman told AFP.
Israeli army spokesman Peter Lerner tweeted later that "5 rockets (were) launched this morning from #Lebanon, (causing) one confirmed explosion in #Israel," and the military was searching for others.
Tension has spiked on the border between the two countries since Lebanese troops gunned down an Israeli soldier driving near the frontier on December 16.
Israeli Defence Minister Moshe Yaalon also warned Beirut that tougher reprisals could follow rockets launched at the Jewish state.
"We will not tolerate fire from Lebanon on our territory... We consider the Lebanese government and army responsible for this morning's fire," said Yaalon.
"The Israeli army responded by firing a large number of shells at the area from where the rockets were fired. If necessary, it will be even tougher," he said.
The United Nations monitoring force on the border, UNIFIL, confirmed the exchange of fire, adding it had contacted both sides, urging them to "exercise maximum restraint".
"This is a very serious incident... and is clearly directed at undermining stability in the area," UNIFIL chief Paolo Serra said in a statement.
"UNIFIL's first imperative is to ensure that there is no further escalation of the situation."
Lebanese army and UNIFIL forces were carrying out patrols in the area after the exchange of fire, an AFP correspondent said.
Israel's border with Lebanon has been largely quiet since the 2006 war with the powerful Shiite movement Hezbollah.
The last time a soldier was killed there was in August 2010, when two Lebanese soldiers and a journalist also died.
In August, four Israeli soldiers were wounded by an explosion some 400 metres (yards) inside Lebanese territory, in a blast claimed by Hezbollah.
Last week, Hezbollah said one of its top leaders was killed near Beirut and blamed Israel for his murder, a charge denied by Israel, which warned against any retaliation.
UN peacekeepers were deployed along the border following the 34-day war in 2006 which killed some 1,200 people in Lebanon, mostly civilians, and 160 Israelis, mostly soldiers.