Lebanon described the bombing as a "heinous crime"

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Displaced families had been sheltering in the basement of a house in Qana, which was crushed after a direct hit.

Lebanon's prime minister denounced "Israeli war criminals" and cancelled talks with the US secretary of state.

Israel said it regretted the incident - but added that civilians had been warned to flee the village.

Prime Minister Ehud Olmert said Israel would "continue to act with no hesitation against Hezbollah" which has been firing rockets into Israel from southern Lebanon.

What has happened in Qana shows this is a situation that simply cannot continue

British Prime Minister Tony Blair

Lebanon crisis 'cannot continue'

Hundreds of Lebanese protesters staged a violent demonstration, ransacking the UN headquarters in Beirut, chanting slogans against the US and Israel and in support of the Hezbollah militants.

Several countries have condemned the attack and renewed their calls for an immediate ceasefire - opposed by Israel and the US.

At an urgent meeting of the UN Security Council, Mr Annan urged members to strongly condemn the Qana attack and to put aside differences to call for an immediate ceasefire.

May God have mercy on the children. They came here to escape the fighting

Qana survivor

In pictures: Qana strike Carnage at Qana

British Prime Minister Tony Blair said on Sunday the situation could not continue and that all hostilities ought to cease once a UN resolution is adopted.

Lebanon's health minister now says about 750 people - mainly civilians - have been killed by Israeli action in Lebanon since their operations began 19 days ago.

Hezbollah has vowed to retaliate after the Qana attack. Several Katyusha rockets hit the border town of Kiryat Shemona on Sunday, wounding several people, in what residents described as the worst day so far.

A total of 51 Israelis, including at least 18 civilians, have been killed in the conflict, sparked by Hezbollah's capture of two Israeli soldiers in a cross-border raid on 12 July.

Intense bombing

Witnesses said the early-morning strike hit the three-storey building where families had been sheltering in the basement, crushing it sideways into an enormous crater.

One survivor said the "bombing was so intense that no-one could move".

Elderly, women and children were among those killed in the raid, which wrought destruction over a wide area.

Reporters spoke of survivors screaming in grief and anger, as some scrabbled through the debris with bare hands.

"We want this to stop," a villager shouted.

"May God have mercy on the children. They came here to escape the fighting."

Rescuers found the experience too much to cope with.

Our correspondent saw a Red Cross rescue worker sitting in the sunshine just sobbing, overcome with emotion.

Israel said the Shia militant group was responsible for the Qana strike, because it used the town to launch rockets.

The BBC's Jim Muir, in Qana, says many did not have the means - or were too frightened - to flee.

'Heinous crime'

Lebanese Prime Minister Fouad Siniora denounced Israel's "heinous crimes against civilians", and said there was "no room on this sad morning" for talks until Israel had halted its attacks.

He called for an "immediate, unconditional ceasefire", and praised Hezbollah militants who were "sacrificing their lives for Lebanon's independence".

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The US secretary of state said she was "deeply saddened by the terrible loss of innocent life.

"We are also pushing for an urgent end to the current hostilities, but the views of the parties on how to achieve this are different," she said.

Correspondents say the town holds bitter memories for the Lebanese.

Qana was the site of an Israeli bombing of a UN base in 1996 that killed more than 100 people sheltering there during Israel's "Grapes of Wrath" offensive, which was also aimed at destroying Hezbollah.

[Note: The number of people killed in the Israeli bombing of Qana was later revised. The Washington based human rights group Human Rights Watch investigated the incident and issued a report on 3 August saying that 28 people were known to have died, while 13 people were missing.]