U.S. mediators are working on a proposal to wind down hostilities between Israel's military and Iran-backed Lebanese armed group Hezbollah, beginning with a 60-day ceasefire, two sources with knowledge of the talks told Reuters on Wednesday, Paralel.Az reports.

The sources - a person briefed on the talks and a senior diplomat working on Lebanon - said the two-month period would be used to finalise full implementation of United Nations Security Council Resolution 1701, adopted in 2006 to keep southern Lebanon free of arms outside state control.

"We'd like to reiterate that we seek a diplomatic resolution that fully implements 1701 and gets both Israeli and Lebanese citizens back to their homes on both sides of the border," said Sama Habib, spokesperson at the U.S. embassy in Beirut, when asked about the proposal.

The latest effort comes as Israel's operation in Lebanon continues to expand. Its army on Wednesday issued a first evacuation order for the eastern city of Baalbek, where tens of thousands of Lebanese, including many who had fled other areas, were residing.

Such notices are usually followed by bombardment. Residents started to flee the city, leading to heavy traffic, but others stayed put as there was nowhere safe to go, former mayor Fuad Ballouk told Reuters.

For a third straight day, Hezbollah reported intense fighting with Israeli forces near the southern town of Khiyam - the deepest Israel's troops have been reported to have penetrated into Lebanon since fighting began.

Israeli strikes on south Lebanon's Sarafand killed at least 10 people on Tuesday - most of them women and children - while a separate strike on the port city of Sidon killed at least five people and injured 37, Lebanese authorities said.