Hizbollah was dealt a blow on Tuesday after a senior commander, and one of the US and Israel's most wanted men, was killed in the -Syrian capital Damascus.

The Lebanese Shia militant group blamed the assassination on Tuesday night of Imad Moughniyah on its arch-foe Israel, a charge swiftly denied by the Jewish state.

But several senior Israeli ministers applauded the killing of the Hizbollah leader, who had played a leading role in the 2006 war with Israel that the group claimed to have won. "The score has been settled," said Israel's YNetnews website.

US officials also welcomed the news of Moughniyah's death, but said they had no information on the killing. "The world is a better place without this man . . . One way or the other he was brought to justice," said Sean McCormack, a state department spokesman.

The US accused Moughniyah of a series of attacks and kidnappings in the 1980s, including the 1985 hijacking of a TWA airliner in which a US navy diver was killed.

Moughniyah died as a result of a car bomb (above, right). Neither Syria's government nor its state-run media commented on the blast. A big setback for Hizbollah, which had been riding high since its war with Israel in 2006, the killing raised fears of a resumption of the conflict on the Lebanon-Israel border, which is guarded by United Nations troops.

Hizbollah, which was yesterday weighing its retaliation, has replenished its rocket arsenal since the war and has warned that it could strike Israel in spite of the UN-controlled demilitarised zone separating them.

Moughniyah's assassination heightened tensions in Beirut, where Hizbollah and the pro-western government are locked in a power struggle that threatens to deteriorate into a fully fledged conflict. Hizbollah, backed by Syria and Iran, has accused its domestic foes of serving US and Israeli interests.

Moughniyah's funeral will be held in the Lebanese capital's southern suburbs today, while supporters of the government will stage a mass rally in downtown Beirut to commemorate the 2005 assassination of Rafiq Hariri, the country's anti-Syrian former prime minister.

A former head of Hizbollah's security apparatus, Moughniyah, 45, was still one of its most important characters. Rumoured to have undergone plastic surgery several times and to be constantly moving between Lebanon, Syria and Iran to escape arrest, he became an almost mythical figure among Hizbollah supporters.

"With all pride we declare a great jihadist leader of the Islamic resistance in Lebanon joining the martyrs," said Hizbollah yesterday. "The brother commander Hajj Imad Moughniyah became a martyr at the hands of the Zionist Israelis."

Ehud Olmert, Israel's prime minister, distanced his government from the killing. "Israel rejects the attempt by terror groups to attribute to it any involvement in this incident. We have nothing further to add," he said in a statement.

But analysts cautioned against reading too much into the response, pointing out that it was not in Israel's interest to boast about pulling off an assassination in a neighbouring, hostile state.

Israel has in the past claimed responsibility for assassinations and, in some cases, denied involvement in attacks later found to have been the work of its agents. In 1992, Israel claimed responsibility for killing the former Hizbollah leader Sayyed Abbas Moussawi in an air attack in southern Lebanon. The killing triggered the bombing of Israel's embassy in Buenos Aires that killed 28 - allegedly masterminded by Moughniyah.

Israeli ministers last month called for the elimination of Sayyed Hassan Nasrallah, Hizbollah chief, after he said Israel's army had left its soldiers' body parts behind in the 2006 war.

Yesterday's attack sent a powerful message to the enemies of Israel and of the US. Analysts saw it as a warning to Syria to stop harbouring militants, particularly leaders of Hamas, the Palestinian Islamist group.

The incident is an embarrassment to Damascus and could spur changes to its security apparatus, made up of competing services. Iran, too, will see Moughniyah's killing as a loss. Considered a link between Hizbollah and its Iranian supporters, he is thought to have spent years in Tehran.