"One aerial bomb directly impacted the building and shelter in the base of the United Nations Observer Group in Lebanon in the area of Khiam," said Milos Strugar, a spokesman for the UNIFIL peacekeeping force. He declined to say how many had died, but confirmed there had been casualties. Mr Strugar said air attacks had continued in the area as rescuers attempted to reach the wounded.
The strike came shortly after Condoleezza Rice, the US secretary of state, left Israel following two days of half-hearted diplomacy.
Mr Strugar added: "There are casualties among the observers. A UNIFIL-dispatched rescue team which is on the spot is still unable to clear the rubble.
"There were 14 other incidents of firing close to this position in the afternoon from the Israeli side and the firing continued during the rescue operation," he said.
In Jerusalem, an Israeli army spokeswoman said the military was investigating the report.
In Rome, UN Secretary-General Kofi Annan declined immediate comment on the bombing, saying only: "We are trying to get more details."
Reports also emerged from the Israeli army last night that it had killed the "senior Hezbollah militant" Abu Jafr in fighting in southern Lebanon.
The claims came as Mahmoud Komati, the deputy chief of the Hezbollah politburo, suggested the group had miscalculated Israel's response to its cross-border raids.
"The truth is - let me say this clearly - we didn't even expect [this] response ... that [Israel] would exploit this operation for this big war against us," said Mr Komati.