"Over the weekend we heard (Hassan) Nasrallah's boasting about his attack plans," he said at the start of the weekly cabinet meeting.
"Let me be clear if Hezbollah dares to make the mistake of attacking Israel, we will lay upon it and on Lebanon a crushing military blow."
In a Friday interview broadcast on Hezbollah's Al-Manar television, Nasrallah warned that key Israeli sites along the Mediterranean coast, including Tel Aviv, were "within range of our rockets".
The head of the Lebanese Shiite movement also said that Israel's arch-foe Iran was "able to bombard Israel with ferocity and force," but "will not start a war".
Last week, Netanyahu said that "Iran has been threatening the destruction of Israel" and warned that Israel's fighter jets "can reach anywhere in the Middle East, including Iran."
Hezbollah is considered to be a terrorist organisation by the United States and is the only faction not to have disarmed after Lebanon's 1975-1990 civil war.
But it is also a major political player in the small Mediterranean country, taking 13 seats in parliament last year and securing three posts in the current cabinet.
Israel has carried out hundreds of strikes in neighbouring Syria against what it says are Iranian and Hezbollah military targets. It has vowed to keep Iran from entrenching itself militarily there.
The Jewish state recently uncovered and destroyed six tunnels passing under the border from Lebanon into Israel.
It alleges Hezbollah had planned to use the tunnels for attacks in Israel.
Nasrallah's interview was to mark the anniversary of the start of his movement's 2006 war with Israel, which killed more than 1,200 Lebanese, mostly civilians, and more than 160 Israelis, mostly soldiers.
Israel has carried out hundreds of strikes in neighbouring Syria against what it says are Iranian and Hezbollah military targets.