Major General Udi Adam, who led Israel's northern command during the 34-day
offensive, submitted his resignation to army chief of staff Dan Halutz as a storm of criticism over the war looked set to push into a second month.
His resignation has fuelled calls for further heads to roll over the conflict that failed to achieve its main aims.
The war left 162 Israelis dead and failed to achieve its main objectives of
retrieving two soldiers captured by Hezbollah guerrillas in a raid on July 12
and halting a barrage of rocket attacks by the Lebanese Shiite militants.
Israel was heavily criticised abroad for its devastating use of force in Lebanon, where more than 1,200 people, mostly civilians, were killed and thousands of homes and infrastructure targets bombed.
The conflict cost Israel an estimated US$5.7 billion but failed to sever the Shiite militia's capability to bombard the north of the country, or secure the release of the two soldiers.
Calls for Halutz to resign
Local media reports claimed that Adam stepped down because of differences
with Halutz over the conduct of the month-long offensive against Hezbollah,
which ended under a UN-brokered ceasefire on August 14.
Amihai Ayalon, a leading member of the centre-left Labour party, said his party leader Defence Minister Amir Peretz - widely lambasted for his handling
of the war - should also follow Adam's example.
"Amir Peretz should change jobs. General Adam should not be the only one to pay the price of the shortcomings," he said.
Amram Mitzna, a former head of northern command, former Labour leader and former mayor of the northern metropolis Haifa that was bombarded by Hezbollah
attacks during the war, also called for Halutz to resign.
General Adam had been widely expected to leave the army in the wake of a decision near the end of the 34-day war to appoint another general as "coordinator of operations in Lebanon" at the Northern Command.
On General Adam's watch, Hezbollah seized two Israeli soldiers and killed eight other troops in a cross-border raid on July 12, an operation that triggered the fighting that ended in a ceasefire on August 14.
Hezbollah fired nearly 4,000 rockets into Israel, embarrassing the Middle East's most powerful army, and the soldiers are still being held.
Under public pressure, Israeli Prime Minister Ehud Olmert has appointed a retired judge to head an inquiry into the way the government and the military handled the war.