Overnight, Israeli troops left the southern Christian town of Marjayoun which they had occupied on Thursday, Lebanese security sources said. Witnesses said later they were also pulling out of the nearby town of Qlaiah.

The Israeli army, which had poured 30,000 troops into the south to fight Hezbollah guerrillas, plans to start handing over some pockets of territory to UN troops in a day or two, Israeli officials and Western diplomats said.

Israel's expedited timetable for withdrawing reflects concerns that its forces on the ground are easy targets for Hezbollah attack. "They want a fast exit in one to two weeks," said a Western diplomat briefed by the Israeli army.

A Lebanese political source said the Israelis could withdrew completely from Lebanon as early as Wednesday and hand over all their positions to an existing UN force, paving the way for the Lebanese army to start deploying in the area from Thursday.

Israel has said it will not withdraw fully until a beefed-up UN force and Lebanese army troops deploy in the south.

An army spokeswoman said more Israeli troops pulled out of Lebanon overnight, but she declined to give numbers. Israeli media reports said 1,000 paratroops crossed into Israel, raising to 2,000 the number of soldiers who have returned.

Hezbollah chief Sayyed Hassan Nasrallah said on Monday night his fighters had won a "strategic victory" over Israel and that it was the wrong time publicly to discuss disarming.

President Bush said Hezbollah, which is backed by Iran, had been defeated. Israeli Prime Minister Ehud Olmert said his country would hunt down Hezbollah leaders.

The "cessation of hostilities" remains fragile. The Israeli army said four Hezbollah mortar bombs had landed near troops in the south overnight, causing no casualties. It said on Monday it had killed at least one guerrilla in shootings after the truce.

But the calm has prompted a chaotic tide of Shia Muslim refugees flowing back to southern villages, despite the risk of unexploded munitions left over from the fighting.

"People need to be aware the dangers are very high," said Astrid van Genderen Stort, spokeswoman for the UN refugee agency UNHCR. She said there had been at least eight incidents involving unexploded ordnance, but had no word on casualties.

The truce has also allowed many Israelis to leave bomb shelters for the first time in a month.

Thousands of vehicles jammed a bombed-out coastal highway linking Beirut to the south from the early hours of Tuesday.

"I want to put Nasrallah's face on the dollar so the whole world can see it," said Majed Aboud, sitting in a truck on the road to the badly bombed village of Qana. "Victory is ours."

Cars, vans and pickup trucks packed with families and belongings strapped to the roof crawled along makeshift roads. Many had pictures of Nasrallah plastered on their windows.

Plans for the expanded UN force are still in their early stages. After a meeting of potential troop contributing nations on Monday, diplomats said a "concept of operations" would be ready by Thursday when another meeting is scheduled.

"We have no formal, specific commitments from troop contributors, but obviously we're continuing those discussions," UN spokesman Stephane Dujarric said. "We have one leg up in that there is already a UN force in south Lebanon."

Lebanon's Defence Minister Elias Murr said the Lebanese army would send 15,000 troops to the north of the Litani River around the end of the week, ready to enter the southern border area.

But he said the army would not disarm Hezbollah guerrillas, who have controlled the area for six years.

"The army is not going to the south to strip Hezbollah of weapons and do the work Israel did not," he told LBC Television.