The escalation in violence came as Israel expanded its military campaign against Hezbollah guerrillas who kidnapped two Israeli soldiers on Wednesday -- bombing the airport and blocking naval traffic in Lebanese waters.
Israel has said it holds the Lebanese government, of which radical Islamic group Hezbollah is a part, responsible for the soldiers' abduction.
Rockets fired from Lebanon hit the center of Safed Thursday, causing casualties, medical sources said. One man was in critical condition and at least 10 others suffered shock and minor injuries. Safed is about 20 kilometers (13 miles) inside the Israeli border with Lebanon.
Police said several rockets hit the town, one of them striking a petrol station. Local officials said the town had not been hit by Hezbollah rockets since 1972.
Lebanese rockets also hit the Jewish town of Carmiel and adjacent Arab village of Majd el-Krum in northern Israel, the army said, according to The Associated Press.
The communities are about 20 kilometers (8 miles) south of the Lebanese border. Channel 10 TV, citing rescue service officials, said one person was moderately wounded in Majd el-Krum.
Hezbollah also threatened to launch a missile attack on the northern Israeli city of Haifa if Israel attacked Beirut, Hezbollah officials told CNN.
Earlier, Israeli fighter jets bombed all three runways at Beirut's main airport -- located in the city's southern suburbs -- rendering them unusable, according to the Israel Defense Forces and a Lebanese aviation official. As a result, the airport was closed and flights were diverted to nearby Cyprus, the official said.
IDF said it targeted the airport because it serves as a central hub for the transfer for weapons and supplies to Hezbollah.
IDF said the aim of the naval blockade, announced at midday, was to "block the transfer of terrorists and weaponry."
Israeli Security Cabinet Minister Isaac Herzog said: "We are taking strong measures so that it will be clear to the Lebanese people and government ... that we mean business."
According to the Israeli daily newspaper, Ha'aretz, Israel is threatening to attack a southern Beirut suburb where Hezbollah leader Hassan Nasrallah lives in retaliation for Hezbollah missile attacks on Israel.
In the past 24 hours, according to IDF, more than 70 Katyusha rockets have hit northern Israel.
Lebanese Interior Minister Ahmed Fatfat called the airport strikes a "general act of war," saying they had nothing to do with Hezbollah, but were instead an attack against the country's "economic interests," especially its tourism industry.
Palestinian President Mahmoud Abbas said Thursday he fears a "regional war is mounting" in the wake of Israel's military campaigns in Lebanon and Gaza. "This is not our interest and will not bring peace and stability to the region," Abbas said, referring to "this (Israeli) aggression."
U.S. President George W. Bush, speaking during a trip to Germany, warned that Israel should take care not to "weaken" Lebanon's government and stressed that Syria "needs to be held to account."
"The democracy of Lebanon is an important part of laying a foundation of peace in that region," Bush said.
"Israel has a right to defend herself," he said. "The concern is that any activities by Israel to protect herself will weaken that government," he said, referring to Lebanon.
Bush also said Syria's President Bashar al-Assad "needs to show some leadership toward peace."
'Severe and harsh response'
Beirut's airport, located in the city's southern suburbs, was renamed Rafic Hariri International Airport last year after the former prime minister who was assassinated in the Lebanese capital.
Another Israeli airstrike, on al-Manar television station, was carried out because the station is used by Hezbollah to incite and recruit activists, according to IDF.
Despite the strike, al-Manar continued to broadcast, a Lebanese security source said.
The Israeli airstrikes came hours after Israel's Cabinet authorized a "severe and harsh" response to the abduction of the two soldiers.
Israeli Prime Minister Ehud Olmert said the attack and abductions were an "act of war" and blamed the Lebanese government, which he said would be held responsible for the soldiers' safe release.
The IDF Thursday released the names of the two Israeli soldiers held captive. They are Ehud Goldvasser, 31, from Nahariya, and Eldad Regev, 26, from the Haifa suburb of Kiryat Motzkin.
Israeli artillery and airstrikes have been pounding Hezbollah targets in southern Lebanon after a cross-border raid Wednesday took the two captives. In all, eight Israeli soldiers were killed -- three in the initial raid and five others in the fighting that immediately followed, according to the IDF.
The cross-border fighting continued Thursday, with numerous Katyusha rocket strikes in the northern Israeli town of Nahariya, according to CNN's John Vause. He said buildings near the hotel he was staying in had been damaged.
Thursday's casualties throughout northern Israel totaled 29, including one woman killed and 15 injured in the Nahariya rocket attack, according to the IDF.
Lebanon's health ministry said 45 people had been killed in Lebanon since the fighting began Wednesday.
The Israeli military said one of its airstrikes on Thursday hit a Hezbollah operational command center in southern Lebanon.
IDF said its strikes have been targeting locations within or adjacent to heavily populated areas that Hezbollah uses for storing rockets and weapons. An IDF spokesman said Hezbollah is responsible for placing the storage sites in areas that would put civilians at risk.
Israel: 'Whatever is needed'
Commenting on the rapidly escalating Israeli response, Herzog said Israel is committed to creating a new dynamic in southern Lebanon.
"What we are doing is an act to change the situation in the region," he said. "It will take a long time -- whatever is needed."
Israeli Defense Minister Amir Peretz struck a similar chord in addressing parliament's Security and Foreign Affairs Committee on Thursday.
"We will not enable Hezbollah to return to ... southern Lebanon along the international border," Peretz said. "We will not allow Hezbollah forces to sit on the borders of the state of Israel."
Hezbollah, an Islamic militia backed by Syria and Iran, demanded "indirect negotiations" for a prisoner exchange to resolve the crisis. Israel has rejected that call, arguing it would lead to more attacks.
"We expect them to be returned to us alive and safely, immediately without any precondition -- no negotiation," Israeli government spokesman Gideon Meir told CNN.
The identities of the kidnapped soldiers had not been released as of Thursday morning.
Hezbollah is designated a terrorist organization by the United States and Israel, but the Islamic militia is a significant player in Lebanon's fractious politics. Its leader, Hassan Nasrallah, told reporters that abducting the soldiers was "our natural, only and logical right" to win freedom for Hezbollah prisoners held by Israel.
Nasrallah said the two soldiers had been taken to a place "far, far away" and that an Israeli military campaign would not win their release.
The new fighting on Israel's northern border comes amid a two-week-old Israeli campaign in Gaza in search of Israeli army Cpl. Gilad Shalit, a soldier kidnapped by Palestinian militants there.
Journalist Anthony Mills in Beirut contributed to this report