The Security Council condemned the death of the Spanish corporal who died from wounds sustained during an exchange of fire between Israeli forces and Hezbollah fighters on the border.
"It is clear that this was because of the escalation of the violence and it came from the Israeli side," Spanish Ambassador Roman Oyarzun told reporters.
The Spanish envoy said he had asked for a full investigation during an emergency meeting of the council called by France to discuss ways to defuse tensions between Israel and Lebanon.
The violence raised fears of another all-out conflict between the two countries, who fought a month-long war in 2006, in a region already wracked by fighting in Syria and Iraq.
Secretary General Ban Ki-moon called for "maximum calm and restraint," urging all sides to "act responsibly to prevent any escalation in an already tense regional environment," a UN statement said.
Tension in the area has been building, especially after an Israeli air strike on the Syrian sector of the Golan Heights killed six Hezbollah fighters and an Iranian general on January 18.
"Our objective is to engage toward de-escalation and to prevent further escalation of the situation," French Ambassador Francois Delattre told reporters.
France presented a draft statement to council members but after meeting for over an hour, the council issued a terse condemnation of the peacekeeper's death and made no mention of de-escalation efforts.
Discussions on the council statement were continuing.
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EXCHANGE OF FIRE
The clashes began when Hezbollah fired an anti-tank missile at a military convoy in the Israel-occupied border area, prompting Israel to respond with air and ground strikes.
The 36-year-old Spanish corporal serving in the UN interim force UNIFIL in southern Lebanon was killed in the exchange of fire.
The 10,000-strong UNIFIL mission said it had observed six rockets fired towards Israel from southern Lebanon and that Israeli forces "returned artillery fire in the same general area."
Senior peacekeeping official Edmond Mulet told council members that the attacks were a "serious violation" of ceasefire agreements and that UNIFIL had launched an investigation, according to a diplomat present at the council meeting.
Israel's ambassador to the United Nations warned in a letter that Israel was ready to take all necessary measures to defend itself and demanded that the council condemn Hezbollah.
"Israel will not stand by as Hezbollah targets Israelis," wrote Ron Prosor in a letter to the council also sent to Secretary General Ban Ki-moon.
Israel occupied parts of Lebanon for 22 years until 2000 and the two countries are still technically at war.
In 2006, Israel fought a bloody war against Hezbollah that killed more than 1,200 people in Lebanon, mostly civilians, and some 160 Israelis, mostly soldiers.