Prime Minister Ehud Olmert will convene his security cabinet Wednesday for a discussion on expanding the IDF ground offensive in south Lebanon.

Israel Defense Forces troops and Hezbollah fighters were engaged in heavy exchanges of fire Tuesday morning in southern Lebanon.

Three IDF soldiers were killed and four others wounded in fierce fighting with Hezbollah militants Monday.

Two soldiers were killed Monday afternoon when they were hit by an anti-tank missile in fighting in the southern Lebanon village of Bint Jbail. One of them was identified as Major Yotam Lotan, 33, of Kibbutz Beit Hashita. Another soldier was killed Monday morning in the village. He was later named as Staff Sergeant Malko Mosha Ambao, 22, of Lod.

Ambao was part of a Paratroopers Brigades force that engaged in gunbattles with Hezbollah. Three of his comrades sustained light wounds.

Later Monday, the IDF warned residents of south Lebanon to remain indoors after 10 P.M. (1900 GMT) and said anyone moving after that would be at risk, a military source said.

"Anyone who does travel is taking a high risk. There is no end period," the source said. "This will allow us to track anyone potentially trying to launch rockets."

The source said the restriction on movement applied anywhere south of the Litani river, which is roughly 20 km from Israel's northern border. He did not specify how the warning had been delivered.

Army unveils plan to hold areas in south Olmert met Monday with Defense Minister Amir Peretz, Chief of Staff Dan Halutz and other senior military and Military Intelligence officials who presented him with their plan for taking control of areas used by Hezbollah to fire its short-range rockets.

Under the plan, the IDF will take control of the area south of the Litani River.

The military officials also presented Olmert with a plan for an operation north of the Litani, in the area of Ramat Nabatiyeh where rockets were launched into Kiryat Shmona. The operation in Ramat Nabatiyeh, however, is likely to be put off for a later stage if necessary.

Olmert gave the military the go-ahead to present the plan to the cabinet, but refrained from expressing his views on it.

Olmert said Monday that the Israel Defense Forces would have no limitations in the fight against rocket fire in the north, saying it was unacceptable that so many people were forced to exist in bomb shelters.

General Staff officers believe that the political leadership will approve an expansion of the ground offensive in the near future. Nevertheless, the officers are waiting to see how the new initiative by the Lebanese government to deploy 15,000 soldiers in the south will be welcomed.

Lebanon to deploy army in south Lebanon will deploy its army in the south of the country after the Israel Defense Forces' withdrawal from the area, the Lebanese cabinet agreed Monday night, in a decision supported by all the ministers present, including the five Shi'ite ministers who represent Hezbollah and Amal.

The decision marks the first time since 1982 that the Lebanese government has decided to impose its sovereignty in the south of the country.

Lebanese officials are hoping that in the wake of the night's decision, the United Nations Security Council will agree to the amended U.S.-French draft resolution that calls for the withdrawal of the Israel Defense Forces from the country.

Political sources in Jerusalem said in response to the Lebanese cabinet decision that Israel was waiting to see how the decision fit in with the Security Council deliberations. The proposal, the sources said, was outlined in an interview Lebanese Prime Minister Fouad Siniora gave to The Washington Post on Monday.

Olmert: No limitations on IDF in fight against Hezbollah rockets "We have to stop the rockets," Olmert said during a visit to the Northern Command.

"We cannot have a million residents living in shelters. On this matter, there will be no limitations on the army. This war has involved fatalities, which hurts and is traumatic. This we know, but at the moment we have to cope with it, both on the battlefield and the home front. I will give you every strength and support, we are not stopping [the fight]."

GOC Northern Command, Major General Udi Adam told reporters Monday that the military is prepared for an expansion of the ground operation in southern Lebanon.

"We are ready for this, and the minute we get the signal we will move to reach the launch sites and end the Katyusha fire," he said.

"The military leadership has plans, and I expect that there are other considerations," Adam said regarding a possible IDF advance across the Litani River, 20km inside southern Lebanon.

"There is a readiness for such a move should the talks between the U.S., France and Lebanon fail."

Peretz said later Monday that he has ordered the IDF to step up the offensive against Hezbollah rocket launching sites in Lebanon if the diplomatic process remains inconclusive.

"We are at one of the most decisive stages of this war," Peretz told the Knesset Foreign Affairs and Defense Committee.

Peretz said in the absence of a diplomatic agreement, he had instructed the army to "take control" of launching sites "wherever they are to minimize the fire of Katyusha rockets and take the Israeli people out of the shelters."

Peretz said Israel was determined to stop the rocketing of its northern territories, either through political or military means, but Israel was not holding back because of diplomatic efforts to resolve the crisis.