Lebanese troops shelled militant positions in the mountains around the town of Arsal on the Syrian border on Monday, as fierce fighting raged there for a third day.
An AFP correspondent on the outskirts of the town said soldiers were firing mortar shells into the mountains and the sound of heavy machine gun fire could also be heard in the area.
Thick smoke rose from Arsal, reportedly after a petrol station in the town was set ablaze.
In the early hours of Monday morning, several hundred people fled the town during a lull in the fighting.
They packed into pick-up trucks and cars to drive out of the region, where militants began fighting the Lebanese army on Saturday afternoon.
Following his arrest, gunmen surrounded army posts before opening fire, sparking clashes that have killed at least 10 soldiers.
Another 13 soldiers are missing, along with an unspecified number of policeman, with Lebanon's army chief General Jean Kahwaji saying Sunday that the troops might have been taken hostage.
Three civilians have also been killed, according to security sources, two of them during the storming of a police post by the gunmen on Saturday and a third killed by sniper fire on Sunday in Arsal.
The violence is the worst in the area since the outbreak of the Syrian conflict in 2011.
Arsal is majority Sunni Muslim and broadly sympathetic to the Sunni-dominated uprising next door against Syria's Bashar al-Assad.
The town is hosting tens of thousands of refugees, and Kahwaji said Sunday that some of the gunmen had emerged from the informal refugee camps in the area.
More than one million Syrian refugees have fled to Lebanon, creating strains on local resources and tensions with the Lebanese population in some areas.