Beirut: Hezbollah leader Hassan Nasrallah on Thursday threatened Israel with "open war", accusing the Jewish state of killing a top commander who was among the United States' most wanted men.

"Zionists, if you want this type of open war then let the whole world hear: let it be an open war," Nasrallah told mourners at the funeral of Emad Mughnieh, a legend to Hezbollah but one of the men most wanted by Israel and the US for planning attacks that killed hundreds.

Hezbollah and its main backer Iran accused Israel of killing Mughnieh in a bomb attack on Tuesday. Israel rejected the charge, though its spy service had long sought to kill him.

Even before Nasrallah spoke, Israel put its embassies and other interests abroad on high alert and boosted troop deployments on the Lebanese border for fear of reprisal. "We have the right, like all human beings, of self-defence and, God willing, we will do whatever is required to defend our brothers, leaders, people and our country," Nasrallah said, addressing the mass funeral via video link. Iran's Foreign Minister Manouchehr Mottaki attended the funeral and read a condolence note from Iranian President Mahmoud Ahmadinejad.

But reflecting deep divisions in Lebanon, Mughnieh's funeral took place shortly after a rally by the Lebanese ruling coalition to mark the third anniversary of the killing of former prime minister Rafik Hariri. His son Sa'ad told the rally his hand was extended to the Syria-backed opposition to end 15 months of conflict and political crisis in the country. Nasrallah responded: "When we see that the extended hand is sincere, it will only be met by an extended hand."