Israel has dismissed accusations it was behind the car bombing last month that killed Mahmoud Majzoub, known as Abu Hamze, and his brother Nidal, both members of the Palestinian group Islamic Jihad, in the southern Lebanese city of Sidon.
Several Palestinian militants and Hezbollah officials have been killed in Lebanon in recent years in attacks their organizations have blamed on Israel.
Two days after the last assassination, rockets fired from southern Lebanon into northern Israel wounded an Israel Defense Forces soldier, prompting the Israel to launch its heaviest air raid against Syrian-backed Palestinian militants and Hezbollah in southern Lebanon since it withdraw from the area in 2000.
Rafeh admitted to the murder of Hezbollah official Ali Hasan Deeb in 1999 in the southern town of Arba, the killing of another Hezbollah official in Beirut in 2003 and the killing of Palestinian militant Jihad Jibreel in 2002, the army said.
Jibreel, killed in a bombing aimed at his car in Beirut, was the son of Ahmed Jibril, head of the Damascus-based Popular Front for the Liberation of Palestine-General Command.
The army said Rafeh had also confessed to planting other bombs that were either found and defused before they were detonated or missed their targets.
Syrian and Iranian-backed Hezbollah as well as Jibril welcomed the arrests in interviews with Hezbollah’s al-Manar TV.
Pro-Syrian President Emile Lahoud said they proved that "Israel had not ceased its attempts to sabotage Lebanon."
Television footage released by the Lebanese Army showed equipment it said was used in the latest attack and discovered either at Rafeh’s house in the Lebanese town of Hasbaya, on the border with Israel, or in a chalet that he used.
The find included what the army said was an Israeli camera that can be used to take detailed photographs of streets while concealed within a bag, forged driving licences and identity documents it said Rafeh had received from Israel.
The footage also showed an air conditioning unit and a large speaker converted into secret cabinets that the army said were used to transport explosives used in the Sidon bombing.
Other finds included a television cabinet and a table fitted with secret drawers to conceal coded messaging devices.
The army said the attackers had used a car door, packed with explosives before being smuggled from Israel, in the bombing that killed the two Islamic Jihad officials in Sidon.
The army is hunting a Palestinian man also believed to be part of the network, and those arrested will be taken to court, security sources said.