Eight Israeli soldiers were killed and 22 wounded in a fierce battle Wednesday, as troops fought with Hezbollah guerrillas for control of a key hilltop town in southern Lebanon, according to Israeli officials.

The deaths came during fighting for control of Bint Jbail, a symbolically important town for the Shiite militant group. The town was one of the centres of the Hezbollah resistance to the Israeli occupation that lasted from 1982 to 2000, and is a strategic site for launching rockets into Israel.

The Arab satellite television channel Al Arabiya reported that 14 Israeli soldiers had been killed, but Hezbollah's chief spokesman Hussein Rahhal said "13 Israelis have been burned alive in their tanks on our land."

Whether the death toll is eight or more, Wednesday was Israel's worst day of casualties since the conflict began on July 12.

In other key developments:

• 49 Canadian evacuees sail from Tyre, a port city in the south of Lebanon;
• Israeli war planes destroy an empty building in Tyre containing Hezbollah offices;
• 12 people in a building close to the offices were wounded, including six children;
• Lebanese officials claim four United Nations observers, reportedly including one Canadian, were killed in an Israeli air strike on their UN post Tuesday.

Also on Wednesday, Israeli Prime Minister Ehud Olmert announced plans to establish a two-kilometre-wide security strip in southern Lebanon that will be free of Hezbollah guerrillas.

One day earlier, Israeli Defence Minister Amir Peretz said Israel intends to maintain a security zone in the south of Lebanon until either Hezbollah is pushed back from the border in a ceasefire agreement, and the flow of weapons to the armed militant group is cut off, or a multi-national force is sent to the region.

Rather than pouring heavy troops into the region to patrol the zone from the ground, the Israelis would control the region from a distance using artillery fire and air strikes, Peretz said.

At a closed meeting of parliament's Defense and Foreign Affairs Committee, Olmert indicated the zone would be markedly different than the "security zone" Israeli troops patrolled during the 18 years Israel occupied southern Lebanon.

"We want a two-kilometer space from the border in which it will not be possible to fire rockets toward soldiers and civilians' houses and in which there will not be contact with military border patrols," Olmert said, according to participants at the closed meeting.

"We do not have any intention of returning to the security zone but want to create an area where there will be no Hezbollah," he was quoted as saying.

Meanwhile, key Mideast and European leaders, and U.S. Secretary of State Condoleezza Rice met in Rome to discuss the crisis, but failed to come to an agreement on details for a ceasefire.

The leaders discussed proposals for disarming Hezbollah and sending an international peacekeeping force to the region for deployment along the border between the two nations.

During Wednesday's meetings, UN Secretary General Kofi Annan issued a strongly-worded statement saying Israel should halt all ground operations, bombardments and blockades, and Hezbollah should stop deliberately targeting Israeli population centres.

Wednesday's fighting occurred as Israeli forces tried to advance into Bint Jbail, a town that has been the setting for fierce battles over the past four days.

A senior Hezbollah official, Mahmoud Komati, told AP on Wednesday that Israeli forces had seized a few points inside Bint Jbail, but had not yet taken the town center.

The Israeli army, meanwhile, said Hezbollah fighters had taken cover in a local mosque.

The town holds the largest Shiite Muslim population in the area and is a stronghold of Hezbollah support.

Fighting around the border towns of Aitaroun, Maroun al-Ras and Bint Jbail has been intense for days as Israeli forces battle to push back guerrillas who have been firing an almost constant barrage of rockets into northern Israel since the offensive began.

Hezbollah sent a new volley of rockets into northern Israel on Tuesday, killing a teenage girl.

Hezbollah's leader, Sheik Hassan Nasrallah, issued a recorded television message Tuesday with the grim warning that guerrillas would now start firing rockets deeper into Israel.

He also said he would not accept any humiliating conditions for a ceasefire with Israel.

With files from The Associated Press