Israel says Wednesday's decision by key world powers not to call for a halt to its Lebanon offensive has given it the green light to continue.
The people of Tyre no longer feel they are in a safe haven
Justice Minister Haim Ramon made the remarks before Israeli cabinet ministers decided not to launch a large-scale ground offensive.
But the security cabinet decided to call up more reserves.
Israeli bombardment of Lebanon has continued throughout the day, with air strikes in many parts of the country.
A Lebanese army base and a radio relay station north of Beirut have been hit.
Clashes are also continuing in southern Lebanon as Israeli troops struggle to gain control of the Hezbollah stronghold of Bint Jbeil, where they have suffered their worst losses.
The bombing of areas near the southern city of Tyre, combined with Wednesday's raid on flats near the city centre, has also sparked a civilian exodus from the city.
Hezbollah has kept up its barrage of rocket attacks inside Israel - the latest hit a chemicals factory near the border town of Kiryat Shmona. There are no reports of casualties.
At least 423 Lebanese and 51 Israelis have died in the violence since Hezbollah captured two Israeli soldiers in a cross-border raid on 12 July.
In other developments:
- Following the deaths of four UN observers in an Israeli air strike, Australia has withdrawn 12 UN peacekeepers, describing the prospect of sending an international force to Lebanon right now as a "suicide mission"
- A poll of Israelis published by Israel's Maariv daily newspaper suggests 82% back the continuing offensive and 95% say Israel's action is justified
Foreign ministers from key countries - including the US, Britain and regional powers - attended emergency talks on the crisis in Rome on Wednesday.
LEBANON TWO WEEKS ON
Three airports bombed
62 bridges destroyed
Three dams and ports hit
5,000 homes damaged
They did not call for an immediate ceasefire, vowing instead to work with the "utmost urgency" for a sustainable truce.
"We received yesterday at the Rome conference permission from the world... to continue the operation," Israeli Justice Minister Haim Ramon said.
Mr Ramon - a close confidant of Israeli Prime Minister Ehud Olmert - said "everyone understands that a victory for Hezbollah is a victory for world terror".
He said that in order to prevent casualties among Israeli soldiers battling Hezbollah militants in southern Lebanon, villages should be flattened by the Israeli air force before ground troops moved in.
He added that Israel had given the civilians of southern Lebanon ample time to quit the area and therefore anyone still remaining there could be considered a Hezbollah supporter.
"All those now in south Lebanon are terrorists who are related in some way to Hezbollah," Mr Ramon said.
The chief of Israel's northern command, Maj Gen Udi Adam, has warned that he expects the fighting to "continue for several more weeks".
The BBC Jim Muir in Tyre says that the progress of Israeli ground troops has not been as fast as expected as they battle through the difficult terrain of southern Lebanon.
Israel suffered its worst losses in an ambush in Bint Jbeil
But Hezbollah's ability to inflict damage appears undiminished - on Wednesday they fired some 150 rockets into Israel, more than on any other day of the conflict.
The head of political programmes at Hezbollah's TV station, al-Manar, Ibrahim Moussawi, says the organisation is determined to continue fighting.
"The Israelis have tried this before since 1982, which culminated in the year 2000 with the defeat of the Israelis and their withdrawal from south Lebanon," Mr Moussawi said.