Israel closed off the area around Quneitra on the occupied Golan Heights on Wednesday after an officer was wounded by stray fire as Syrian rebels seized control of the crossing.
The UN peacekeeping force which monitors the armistice line said several mortar rounds struck near its positions as rebel fighters, including some from Al-Qaeda affiliate Al-Nusra Front, stormed the crossing in deadly fighting with government troops.
"From what we know, opposition forces overran the Syrian regime forces on the Syrian side of the Quneitra crossing, some of those including the Al-Nusra Front, which ultimately leaves the crossing in the opposition forces' hands," Israeli army spokesman Lieutenant Colonel Peter Lerner told AFP.
He said there had been "extensive fighting" on the Syrian side of the ceasefire line since early Wednesday including several instances of "errant fire."
Three mortar rounds had struck the Israeli-occupied side of the plateau as well as gunfire which moderately wounded an officer, he said.
Britain-based monitoring group the Syrian Observatory for Human Rights said at least 20 Syrian soldiers and four rebels were killed in the fighting for the crossing.
The UN Disengagement Observer Force said there had been heavy exchanges throughout the day and these were continuing.
"Since early this morning, UNDOF has observed heavy fighting between Syrian armed forces and armed members of the opposition in the area of separation," said spokesman Stephane Dujarric.
"Several mortars landed in or near UN positions. Israeli Defence Forces (IDF) retaliated with fire.
"The UNDOF force commander remains in close contact with Syrian authorities, and the IDF to urge restraint and to prevent an escalation of the situation."
Asked about reports that rebels had seized the crossing, he said: "UNDOF is not in a position right now to confirm that this group has taken it over as there is still fighting going on."
In June 2013, there was a similar takeover of the crossing by rebel forces, but the Syrian army managed to regain control.
The Israeli army said it had "substantial forces" on the ground and was prepared for any eventuality, with troops sealing off the area as a defensive measure.
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"We have declared a closed military zone in the immediate area of the crossing and the roads leading to it. We are prepared for any potential spillover effect into Israel," Lerner said.
- After Syria, Israel -
"The opposition forces including the Al-Nusra Front have been on the border area for some time now, but this is not necessarily an increased threat (to Israel)," he said.
"These forces have said multiple times that when they are done with Syria, they will head to Israel. Their hands are tied up in Syria at the moment, so we have to be prepared for that development."
Earlier the army said it had responded by hitting two Syrian army posts.
As a result of the fighting on the Syrian-controlled side of the Heights, the level of alert was raised on the Israeli side, a spokeswoman said, without confirming that it had been increased to the highest level.
On Sunday, at least five rockets hit the Israeli-occupied side of the upland, all due to stray fire, the army said.
In June, an Israeli teenager was killed in a deliberate cross-border attack, prompting Israeli warplanes to attack Syrian military headquarters and positions.
Israel, technically at war with Syria, seized 1,200 square kilometres (460 square miles) of the Golan Heights during the 1967 Six-Day War and later annexed it in a move never recognised by the international community.
Since the Syrian conflict erupted in 2011, the plateau has been tense, with a growing number of rockets and mortar rounds hitting the Israeli side, mostly stray, prompting occasional armed responses.
UNDOF's strength has become more more and more depleted by the withdrawal of contributing nations' troops in the face of the persistent fire.
The Philippines said Saturday it would repatriate its 331-strong contingent in the UN Disengagement Observer Force, mirroring previous moves by Australia, Croatia and Japan.