BEIRUT, Lebanon -- In a stinging defeat for the U.S.-backed government of Lebanon, the Islamist group Hezbollah bolstered its political power in this volatile land on Israel's border.

Hezbollah reached a bargain with the weak Lebanese government that essentially gave the Islamic group veto power in a new government to be formed.

The deal comes two weeks after Hezbollah flashed its military might by seizing Beirut neighborhoods to protest efforts to rein it in. The trigger was unusual: Hezbollah was expanding a secret communications network, and the government wanted it dismantled. The ensuing fighting this month left 67 dead, in the worst internal strife since a long civil war ended in 1990.

Wednesday's agreement could have broad regional implications. It appeared to be the latest rebuke to the U.S.'s diplomatic efforts in the region to marginalize Syria and Iran, both big supporters of Hezbollah. The bargain met Hezbollah's longstanding demand for a political setup in which it could block any major legislation it opposed.

The Bush administration welcomed the agreement as an important tool for avoiding a potential civil war between Hezbollah and the pro-Western Lebanese government led by Prime Minister Fuad Siniora. "It's not perfect as a solution, but you have to weigh it against the alternative," said Assistant Secretary of State David Welch.