The official says Olmert told his Cabinet that "we know what happened to them." It is the first time that Israel has said definitively the two men are no longer alive. Hezbollah has given no information on their conditions.

The official spoke on condition of anonymity because the meeting was still going on.

Olmert made the comments during a Cabinet debate over a proposed prisoner swap with Hezbollah. Under the deal, Israel would free a notorious Lebanese guerrilla in exchange for the two soldiers.

Photo: Captured Israeli soldiers Ehud Goldwasser and Eldad Regev