Phosphorus weapons can cause severe burns and are banned for use in civilian areas, but Israel insisted it used the weapons in accordance with international law.
Cabinet minister Yaakov Edri said Israel used the weapons in August during fighting against Hezbollah. Mr Edri was speaking on behalf of Defence Minister Amir Peretz, according to his spokeswoman, Orly Yehezkel.
"The Israeli army holds phosphorous munitions in different forms," Mr Edri said. "The Israeli army made use of phosphorous shells during the war against Hezbollah in attacks against military targets in open ground."
During the war, the Lebanese government accused Israel of dropping phosphorous bombs but until now Israel had said it only used the weapons to mark targets or territory, the Israeli newspaper Haaretz reported.
Mr Edri did not specify where or against what types of targets the phosphorous bombs were used.
He pointed out that international law does not ban the use of such weapons. However, many international human rights groups, including the Red Cross, have pushed to ban phosphorous weapons.
Phosphorous is a translucent wax-like substance with a pungent smell that, once ignited, creates intense heat and smoke.
The Geneva Conventions ban using white phosphorous against civilians or civilian areas. The Israeli military said its use of weapons "conforms with international law," and it investigates claims of violations based on the information provided.
More than 1,200 civilians were killed on both sides during the conflict, which started with Hezbollah's kidnapping of two Israeli soldiers in July.