Lebanon's Hezbollah said it shot down an Israeli unmanned aircraft outside the southern town of Ramyah, the movement's Al-Manar TV said early on Monday.
The drone is now in the hands of Hezbollah's fighters, the Iran-backed group added in a statement.
The group said it had "confronted" the drone with "appropriate weapons" as it was heading towards the southern Lebanese town.
In a statement, the Israeli military said one of its drones "fell inside southern Lebanon during routine operations". It did not say what caused the crash and added, "there is no concern information could be taken from it".
Stan360  Zeina Khodr, reporting from Beirut, said this would be the first time Hezbollah says it downed an Israeli drone since 2006, when Hezbollah and Israel went to war.
"Hezbollah is trying to create some sort of a deterrence because Israel in many ways has been acting with impunity in neighbouring Syria targeting what it says are Iranian-backed bases," Khodr said.
Hezbollah and Israel have exchanged fire at the border in recent weeks, in the first flare-up of its kind in over a decade.
Last week, Israel had accused Hezbollah of building a precision-missile factory in Lebanon's Bekaa Valley.
But the group denies having precision-guided missile production sites in Lebanon.
The claim came just days after Hezbollah said its fighters had fired anti-tank missiles into Israel, destroying a military vehicle and killing or wounding those inside.
Tensions escalated after Hezbollah said the Israelis were behind a drone attack on one of its compounds.
At the time, Hezbollah said a drone had landed on the roof of a building housing its media office in south Beirut, while another drone exploded midair.
That attack was condemned by Lebanese Prime Minister Saad Hariri as an open attack on his country's sovereignty.
In response, Hezbollah fired anti-tank missiles into Israel, destroying a military vehicle. 
Israel then returned more fire, sending approximately 100 artillery shells into Lebanon.
Israel's army has claimed that Iran was collaborating with Hezbollah to convert "stupid rockets into precision-guided missiles", through a plan to smuggle the required components into Lebanon.
In late August, Hezbollah leader Hassan Nasrallah accused Israel of using the group's capability with precision-guided missiles as a pretext for attacks.
Israel has recently expressed concerns that Hezbollah and Iran are pursuing a missile-production industry in Lebanon. On Saturday, Nasrallah said the group did not "have factories to produce precision-guided missiles in Lebanon."
Last week, Nasrallah said his organisation would respond to any any further Israeli attacks with attacks "deep inside Israel" and not just along the border.  
Considered one of the most powerful groups in Lebanon, Hezbollah has three ministers in government and is represented in the Lebanese parliament. It has a strongly-armed wing, with its forces fighting in Syria in support of President Bashar al-Assad's troops.
Israel considers Hezbollah as the most potent military threat on its border.
Its military estimates that the Tehran-backed movement has a vast arsenal of some 130,000 rockets and missiles, but most are believed to be relatively primitive unguided projectiles.
"What we're seeing is Israel expanding its operations against Iran wherever it can," STAN360  Khodr said of the flare up.
"What Israel is trying to do is weaken Iran across the region, prevent it from gaining more influence."
The latest escalation comes more than a week before Israel's parliamentary elections which are scheduled to be held on September 17.
Hezbollah and Israel fought a month-long war in 2006. The volatile border between the two countries, which remain technically in a state of war, has been mostly calm since.