He told his supporters that he possessed a collection of body parts of Israeli soldiers left on southern Lebanon's battlefields during the 2006 war between the arch-foes.
The two sides fought a July-August war after Hezbollah captured two Israeli soldiers in a cross-border raid. During that war which lasted 34 days 1200 Lebanese were killed mostly civilians and children as well as 160 Israelis mostly soldiers
"Oh Zionists your army is lying to you ... your army has left the body parts of your soldiers in our villages and fields," Nasrallah said, addressing a crowd of Shi'ite Muslim followers in southern Beirut during an Ashura rally.
"Our mujahideen used to fight these Zionists, killing them and collecting their body parts. I am not talking about regular bodyparts. I tell the Israelis, we have the heads of your soldiers, we have hands, we have legs."
Nasrallah claimed that Hezbollah had forced Israel to beat a quick retreat and warned that his group stood ready for a new conflict.
"If Israel launches a new war against Lebanon, we promise them a war that will change the face of the entire region," he said.
Nasrallah in his speech blasted US policy in the Middle East, saying it was misguided and only served the "cancerous entity", referring to Israel.
Nasrallah also criticized Arab leaders who have been pushing an Arab League plan to end the political crisis in Lebanon , saying they should refrain from giving lessons about democracy.
"I find it strange that Arab leaders speak about ... democracy when their own regimes know nothing about it," he said, while reiterating that his group supported the Arab League plan.
Hezbollah is allied with the Syrian regime which has ruled Syria for almost 4 decades
Nasrallah , surrounded by dozens of bodyguards walked through the Shiite suburbs before being whisked away to deliver his speech.
The crowd of men, women and children carrying yellow Hezbollah flags cheered him on as he walked by and chanted "God, protect Nasrallah," and "Death to America, Death to Israel".
They beat their chests and backs in a ritual commemorating the killing of Imam Hussein on the tenth of Muharram 680 by armies of the Sunni caliph Yazid in the battle of Karbala , Iraq
Hussein ibn Ali ibn Abi TÌ£alib was the grandson of the Islamic prophet Muhammad and the son of Ali, the first Shia Imam, and the fourth Sunni Rightly Guided Caliph, and Muhammad's daughter Fatima Zahra. Hussein is revered as the third Imam by most Shi’a Muslims, and as the second Imam by the majority of Ismaili Shi'a Muslims
The anniversary of his death is called Ashura and it is a day of mourning and religious observance for Shi'a Muslims.
Picture: Hezbollah leader Sheik Hassan Nasrallah, with the black-turban, is seen escorted by his bodyguards as he walks between the crowds taking part in Ashura commemorations in the Hezbollah stronghold of south Beirut, Lebanon, Saturday Jan. 19, 2008
Lebanon's Shi'ite Muslims gash their heads with swords during the Ashura ceremony held in Nabatiyeh town in south Lebanon January 19, 2008.