Assaf Namer was fighting with the Israeli army when he was killed along with seven other soldiers during a fierce battle in Bint Jbeil.
Sergeant Namer, whose family lives in Sydney, was born in Israel but moved to Australia with his family when he was 10.
Acording to Israeli media reports, the Australian citizen moved back to Israel two and a half years ago to enlist in the army.
He is the first Australian killed in the war between Israel and Hebollah guerrillas, which began two weeks ago and which has claimed nearly 500 lives.
Sgt Namer's sister and mother left Sydney today on their way to Israel.
The Australian was due to be discharged from the army within a month and planned to settle down in Israel with his Tel Aviv-based girlfriend.
Yesterday's deaths of the nine Israeli soldiers was highest death toll since Israel's massive offensive was launched 15 days ago.
The ninth Israeli military death was not far from the nearby hilltop village of Marun al-Ras, which the army said it had taken control of on Saturday.
Twenty-two soldiers were injured in the fighting in the Lebanese border town of Bint Jbeil, which is a Hezbollah military stronghold.
Israel presses on in Lebanon
The fierce exchanges came as Israel sought to press its ground incursion into south Lebanon after meeting tough resistance.
According to police and militant groups in Lebanon, two Hezbollah fighters were killed and eight civilians wounded in the violence.
Israel also carried out new air strikes against the southern port city of Tyre, with rescue officials warning that dozens of people were trapped under rubble.
In separate fighting in the Gaza Strip also on Wednesday, Israeli forces killed at least 23 Palestinians.
Israel launched the offensive against Lebanon on July 12 in response to Hezbollah killing eight Israeli soldiers and seizing another two in a cross-border attack.
Haifa under seige
Israeli medical sources said at least six people were wounded, one seriously, after a fresh barrage of Hezbollah rockets slammed into the northern Israeli city of Haifa on Wednesday.
More than 125 missiles hit the port of Haifa and other parts of northern Israel, with at least 11 rockets landing in the town of Carmiel.
Hezbollah rockets have killed 18 civilians across northern Israel since the conflict erupted.
Violence in Gaza continues
On the nation’s second front, Israel pounded the Gaza Strip on Wednesday with air strikes and artillery killing 24 Palestinians, including a baby and two toddlers.
It was the deadliest day in the territory for two weeks and came just after Palestinian president Mahmud Abbas demanded an immediate ceasefire to Israel's offensive.
At least seven of the dead were militants, including four from the armed wing of the governing Hamas and another from the Popular Resistance Committees.
But a seven-month-old Palestinian baby girl was also killed, along with two three-year-old girls and a 17-year-old boy.
Medics said most of the bodies brought into hospital after the attacks were ripped to pieces. Paramedics took at least 69 wounded people away for treatment, including two journalists working for Palestine TV.
An Israeli military spokesman said the air force had carried out more than a dozen air strikes targeting "armed gunmen" east of Gaza City as troops mounted a fresh incursion in the outer fringes of the largest Palestinian city.
Isreal’s launched the offensive in the Gaza Strip with the twin purposes of retrieving captured soldier, Corporal Gilad Shalit and stopping rocket attacks.
At least 140 Palestinians have now been killed in the four-week assault that has been increasingly sidelined as the world focuses on a deadlier conflict in Lebanon.
Offensive to continue: Israeli General
General Udi Adam, Israel's commander in the north, warned that the blitz against Lebanon would continue for "several more weeks".
He said the troops were killed after being "ambushed by dozens of Hezbollah fighters" around Bint Jbeil.
Two elite infantry regiments were conducting the offensive backed by armored personnel carriers and air force, he said.
"Today is a difficult day and I regret to say that there will be more like it," Israel's commander in the north said. "But... dozens of terrorists have been killed."
Lebanese security sources confirmed that guerrillas ambushed an Israeli force advancing on the town, 4 kilometers from the frontier.
Hezbollah sources said the Israeli force was cut off and most of its vehicles were destroyed. "Our men can hear the screams of their wounded calling for help," one source said.
Civilians still trapped in southern Lebanon
The UN peacekeeping force in Lebanon said there were still a number of civilians caught in the crossfire and stranded in three towns, including Bint Jbeil.
Meanwhile, police said an Israeli air strike destroyed a three-storey house in the border village of Yarun, close to Bint Jbeil, burying 10 civilians, including children, under the rubble.
It was not immediately known if all the civilians were killed.
Over 1,000 inhabitants of eight Lebanese villages close to the Israeli border and Bint Jbeil were desperately fleeing their homes en masse Wednesday after being given a three-hour ultimatum to leave by the Israeli army.