The suspension comes as the UN Security Council members reached a unanimous agreement on a statement expressing the 15-nation body’s “extreme shock and distress” at the shelling of Qana.
Meanwhile an Israeli official has suggested the Qana blast could have been caused by Hezbollah explosives.
Senior air force officer Amir Eshel told journalists that Israeli aircraft had targeted the site seven hours before what he said was the deadly blast.
"As far as we understand, this building was attacked between midnight and 1am, some seven hours before it sustained the serious hit," he said.
"The first reports (of casualties) arrived between 8 and 8:30," he said.
UN statement
The UN Security Council statement “strongly deplores this loss of innocent lives" in Qana but does not call for an immediate truce, as requested by UN Secretary-General Kofi Annan but opposed by the United States.
The statement also affirms the council's determination to work "without any further delay" to adopt a resolution "for a lasting settlement of the crisis".
It also “deplores any action against UN personnel”.
Lebanon says more than 60 bodies have been pulled from the rubble in Qana.
The attack has triggered global outrage and warnings of retribution from Hezbollah.
Safe passage
Following talks between the US Secretary of State and senior Israeli officials in Jerusalem, a spokesman for Ms Rice said Israel would coordinate with the United Nations on a 24-hour period of "safe passage" for civilians that wish to leave southern Lebanon.
"Israel has, of course, reserved the right to take action against targets preparing attacks against it," the spokesman said, adding that the 24-hour safe passage could be renewed once it expires.
Secretary Rice, whose latest Middle East mission was thrown into turmoil by the attack, earlier said it was time to "get to a ceasefire" in Lebanon but stopped short of calling for an immediate halt to hostilities.
Israel 'on defensive'
Israel went on the defensive over the deaths in Qana, expressing "deep regret" but saying Hezbollah was to blame for using the village as a site to launch rockets at Israel.
In New York, Israeli Vice Prime Minister Shimon Peres said: “(The Qana attack is) a tragedy, particularly the death of the children. There's one thing in the world we don't like to see - a child becoming a victim of war. But we are in a very strange situation we didn't initiate," Mr Peres said.
When asked who was responsible for the civilian deaths in Qana,
Mr Peres said: "Totally, totally it's (Hezbollah's) fault."
"You ask when will it stop? When one of three things happens: either Hezbollah will run out of ammunition, or they will get tired or they will be under the pressure of the Lebanese government," Mr Peres said.
Prime Minister Ehud Olmert said Israel would continue the blitz and he would "not request the defense establishment to stop the fire or change the type of operations."
Mr Olmert vowed to "continue to act with no hesitation against Hezbollah. We will not stop this operation and explain to the world that we are doing the right thing."
"Qana and its surroundings are a center for the launching of rockets against Kiryat Shmona and Afula," Mr Olmert said, referring to towns in Israel's north. "Since the start of the incidents, hundreds of rockets have been fired from around the village, and dozens from inside it," he said.
"Hezbollah used the village of Qana as a base to launch rockets and it bears responsibility that this area is a combat zone," he said. "Israel has no intention of hitting innocent civilians and the responsibility falls entirely on Hezbollah," Army spokesman Jacob Dalal said.
Israel also said it had repeatedly warned the residents of the area to leave by throwing fliers on the ground over the past several days.
Earlier, Mr Olmert said he was in "no rush" for a truce and told secretary Rice that Israel needed 10 to 14 days more to continue its offensive against Hezbollah, an Israeli government official said.
Israel unleashed its firepower on Qana after flatly rejecting a UN call for a 72-hour truce to allow the delivery of humanitarian aid to Lebanon.
Homes in ruins
Police said the pre-dawn air raid on Sunday left homes in ruins and villagers trapped under the rubble.
Bahia Hariri, an MP for southern Lebanon, said 15 of the children were disabled.
Rescue workers with only their bare hands clawed through rubble of flattened homes and an underground shelter to find survivors while mothers hugged their dead children.
"The first thing I remember is spinning around. My head hit the wall and I heard screams," said Qassem Shalhoub, who lost many family members. "They were all calling at me. They were saying, 'stop the bleeding.' Others said, 'pull my son from the rubble.'"
The village, said to be where Jesus turned water into wine, was the site of an Israeli bombing of a UN base in April 1996 that killed 105 people during Israel's "Grapes of Wrath" offensive - also aimed at wiping out Hezbollah.
It was the bloodiest attack since Israel launched its war on the Shiite Muslim group Hezbollah following the capture of two soldiers on July 12.
Protests
In Beirut, a mob of angry demonstrators smashed into the UN building as thousands took to the streets in protest after the Qana attack.
Thousands of protestors in the Middle East and Europe also demonstrated against Israel's air strike on Qana.
Around 5,000 protesters marched in Belgium following the attacks, as did more than 600 in Paris.
Security Council meeting
After the Qana attack, the UN Security Council called an emergency meeting but the United States again blocked any condemnation of its ally in a special statement.
France meanwhile pushed for a separate full resolution calling for an immediate halt to fighting between Israel and Hezbollah.
The 15-member council met at the request of UN Secretary General Kofi Annan and Lebanese Prime Minister Fuad Siniora.
"We must condemn this action in the strongest possible terms, and I appeal to you to do likewise," Mr Annan told the council.
"I'm deeply dismayed that my earlier calls for immediate cessation of
hostilities were not heard, with the result that innocent lives continue to be taken and innocent civilians continue to suffer," he said.
Mr Annan criticised Israel and Hezbollah. "It is important to stress that both sides in this conflict bear a heavy responsibility, and there is strong prima facie evidence that both have committed grave breaches of international humanitarian law."
But the council was unable to agree a statement that was demanded by Qatar which wanted a call for a cessation of hostilities to be included and called the Israeli attack a deliberate act.
Diplomats said US ambassador John Bolton again led opposition to the strong wording in the statement. But he said he still hoped that a compromise could be reached.
"I think what we're going to try to do today is see if we can agree on a
presidential statement or a press statement that will express our profound regrets and condolences to the families of those who have died" in Qana, he said.
The French resolution also called for a permanent ceasefire; "full implementation" of previous UN resolutions, "including the disarmament of all militias in Lebanon and the extension of the government of Lebanon's authority over all its territory"; and the establishment of a buffer zone.
Rice 'saddened'
Secretary Rice voiced deep sadness over the loss of "innocent" life in the attack and urged Israel to take "extraordinary care" to avoid civilian casualties.
She pledged to work for a ceasefire as soon as possible but again stopped short of demanding an immediate halt to hostilities.
US President George W Bush vowed to work with the United Nations for what he called "a sustainable peace" in Lebanon.
Mr Bush himself did not mention the Qana attack by name but said the latest losses of civilian life demanded that world powers work together to resolve the crisis through the United Nations.
"The current situation in the Middle East is a reminder that all of us must work together to achieve a sustainable peace."
The White House, Israel's staunchest backer, urged the Jewish state to use restraint in its military offensive in Lebanon, calling the Qana killings a "horrible event".
US Under Secretary of State Nicholas Burns said the deaths were "tragic" but that they did not constitute a war crime.
The White House, Israel's staunchest backer, urged the Jewish state to use restraint in its military offensive in Lebanon, calling the Qana killings a "horrible event".
US Under Secretary of State Nicholas Burns said the deaths were "tragic" but that they did not constitute a war crime.
"War crime"
Lebanese Prime Minister Fuad Siniora denounced the Qana carnage as a "war crime," demanding an immediate ceasefire in a conflict that Health Minister Mohammed Khalifeh said had killed 750 people.
An AFP count has put the death toll at more than 500, while the UN has said around one third of the casualties were children.
Hezbollah and Palestinian militant movements Hamas and Islamic Jihad have vowed revenge.
Mr Siniora ruled out any talks on putting an end to the conflict until there was an immediate halt to Israel's offensive, signalling the likely failure of secretary Rice's efforts to win support for the deployment of an international force in southern Lebanon.
"There is no place on this sad morning for any discussion other than an immediate and unconditional ceasefire as well as an international investigation into the Israeli massacres in Lebanon now," he told reporters.
Secretary Rice, on her second trip to the region in less than a week, refrained again from calling for an immediate truce after talks in Israel and a trip to Lebanon was cancelled.
"We want a ceasefire as soon as possible, I would have wanted a ceasefire yesterday if possible, but the parties have to agree to a ceasefire and there have to be certain conditions in place," she said.
A US official said secretary Rice would return home to Washington today to start intensive diplomacy aimed at reaching a UN resolution on the conflict.
International reaction
Reaction to the bloodshed was fierce across the Arab world, and even Britain, Washington's closest ally, branded the Qana attack as "quite appalling."
In Europe, Finland, which holds the rotating EU presidency, said it was "shocked and dismayed" by the strikes.
"There is no justification for attacks causing casualties among innocent civilians, most of them women and children," it said in a statement, echoing condemnations from Scandinavian and other European countries.
British Foreign Secretary Margaret Beckett described the Qana raids as "quite appalling" and said Britain had "repeatedly urged the Israelis to act proportionately".
German Foreign Minister Frank-Walter Steinmeier expressed "profound pity" for the victims, calling on Israel to observe "proportion" in its attacks and avoid civilian casualties, and reiterating calls for a swift ceasefire.
Britain and Germany issued a joint statement saying the events at Qana "have underlined the urgency of the need for a ceasefire as soon as possible."
Switzerland said it acknowledged the right of Israel to defend itself but added: "The operations should adhere strictly to the rules of international humitarian law."
French President Jacques Chirac condemned the bombing as an "unjustifiable action which shows more than ever the need to agree on an immediate ceasefire".
EU foreign policy chief Javier Solana said "nothing can justify" the deadly bombardment and Syria, Lebanon's former powerbroker, described it as "state terrorism."
"These aggressions are crimes against humanity and war crimes in all senses of the words," Lebanese Information Minister Ghazi Aridi said. "It is to hide their failure in achieving their military objectives."
Arab League Secretary General Amr Mussa said he "strongly condemned Israel's ongoing barbaric attacks on Lebanon, the latest of which is the attack on the village of Qana."
The Organisation of the Islamic Conference said "the latest Israeli
massacre amounts to a war crime and shows Israel's contempt for international law and the Fourth Geneva Convention on the protection of civilians in times of war."
Egyptian President Hosni Mubarak, whose country has been involved in diplomatic efforts to defuse the crisis, called Israel's attack "irresponsible" and reiterated his call for an immediate ceasefire.
Jordan, another regional broker, also strongly condemned the raid, while Iran blamed the bloody attack on secretary Rice's visit to the region.
Palestinian president Mahmud Abbas condemned the attack and asked the United Nations to oversee an immediate ceasefire, top Palestinian negotiator Saeb Erakat told AFP.
Lebanon attacks
In the latest attacks on Lebanon, Israeli warplanes launched a series of air raids on unihabited areas near the Hezbollah stronghold of Baalbeck in the east of the country, security sources said.
There were no reports of casualties.
Israeli air strikes have also targeted areas near Lebanon's Masnaa border crossing with Syria for the second time in as many days, police said.
Israeli air raids targeted the same area overnight Saturday, closing off the main road to Damascus and wounding at least one person.
Dozens of other villages around the southern port city of Tyre have also been bombarded with fire from the Israeli navy, air force and artillery.
Fresh fighting also flared on the border after Israeli forces made a fresh push into southern Lebanon near the village of Taibe.
Hezbollah said its Shiite guerrillas had inflicted casualties on Israeli troops during "fierce confrontations".
The attacks came after Hezbollah leader Hassan Nasrallah vowed to strike cities in the centre of Israel if the Jewish state continued to attack civilians in Lebanon.