Fought in parallel to the Gaza war, the hostilities have raised concerns of a wider and ruinous war between the heavily armed adversaries, prompting U.S. diplomatic efforts to deescalate the fighting.

A Hezbollah statement identified the commander as Mohammed Nasser, declaring him a martyr without providing further details. There was no immediate comment from the Israeli military.

The sources said Nasser was responsible for a section of Hezbollah's operations at the frontier, where the sides have been waging their worst conflict since a war in 2006.

He was killed in an Israeli strike outside the southern Lebanese city of Tyre, the sources said. One of the sources said a second Hezbollah fighter and a civilian were also killed.

They said Nasser was of the same rank and importance to the group as Taleb Abdallah, a top commander who was killed by an Israeli strike in June, prompting Hezbollah to fire its largest barrages of drones and rockets yet in retaliation.

Israeli Defence Minister Yoav Gallant said on Wednesday that Israeli forces would take any action necessary against Hezbollah but that they preferred a negotiated arrangement.

"We are striking Hezbollah very hard every day and we will also reach a state of full readiness to take any action required in Lebanon, or to reach an arrangement from a position of strength. We prefer an arrangement, but if reality forces us we will know how to fight," Gallant was quoted as saying in a statement issued by his office.

The hostilities have inflicted a heavy toll on both sides of the frontier, forcing tens of thousands of people to flee their homes.

Israeli attacks in Lebanon have killed more than 300 Hezbollah fighters and 87 civilians, according to Reuters tallies. Israel says fire from Lebanon has killed 18 soldiers and 10 civilians.