Israeli forces will remain positioned in southern Lebanon beyond the 60-day deadline for withdrawal set out in the ceasefire deal with the militant group Hezbollah.
Prime Minister Benjamin Netanyahu's office has confirmed the delay, blaming the Lebanese Army for failing to take control of areas of southern Lebanon previously controlled by Hezbollah.
The 60-day ceasefire between Israel and Hezbollah came into force on November 27, after more than a year of conflict.
More than 1.2 million people were displaced in southern Lebanon, and more than 60,000 were evacuated from northern Israel during the fighting.
The terms of the truce included a demand for Israeli forces to withdraw from region south of the Litani River to the northern Israeli border, for Hezbollah to move fighters and weapons from the area and for the Lebanese Army to move in alongside United Nations peacekeepers.
The deadline for those arrangements is 4am local time on Sunday, which is 1pm AEDT.
In a statement, Mr Netanyahu's office said the country's forces would remain.
"The outline for the ceasefire in Lebanon stipulates that the IDF's phased withdrawal 'should' be implemented within 60 days," a spokesperson said.
"The clause was worded this way with the understanding that the withdrawal process may continue beyond 60 days.
"Since the ceasefire agreement has not yet been fully enforced by the State of Lebanon, the phased withdrawal process will continue, in full coordination with the United States."
Hezbollah had earlier argued any delay in an Israeli withdrawal from southern Lebanon should be "considered a flagrant violation of the agreement and an infringement on Lebanese sovereignty" and that the Lebanese government should do everything in its power "to retrieve the land and snatch it from the clutches of occupation".
The US and France worked to broker the ceasefire, and have been overseeing the enforcement of the deal for the last two months.
Israel has been repeatedly accused of jeopardising the truce through ongoing strikes in southern Lebanon.
On Friday, Israeli media outlets reported that Mr Netanyahu's government asked the United States for an extra 30 days to pull its troops out.
The new Trump administration said it was necessary to extend the deal.
"All parties share the goal of ensuring Hezbollah does not have the ability to threaten the Lebanese people or their neighbours," a White House National Security Council spokesperson said.
"To achieve these goals, a short, temporary ceasefire extension is urgently needed.
"We are pleased that the IDF has started the withdrawal from the central regions, and we continue to work closely with our regional partners to finalise the extension."
