Speaking to al-Jazeera, Nasrallah said his organization had weapons capable of reaching every corner of Israel.
Nasrallah told the Qatari TV channel that the kidnapping of two Israeli soldiers last summer was planned well in advance.
"Our brothers observed the area of the operation for at least three months. All this time the Israelis did not sense us. Many civilian cars passed through the area but we were not interested in harming or kidnapping civilians," Nasrallah said.
The kidnapping of IDF soldiers Ehud Goldwasser and Eldad Regev on July 12 prompted Israel to declare all-out war against Hizbullah.
He boasted that he oversaw the operation from Hizbullah's headquarters in the stronghold of Dahiya in Beirut, most of which was destroyed by Israeli airstrikes.
Nasrallah denied comments by French Foreign Minister Bernard Kouchner that Regev and Goldwasser were alive.
Kouchner made the remarks on the heels of French-sponsored talks between Lebanon's 14 faction leaders two weeks ago.
"This report is untrue. The French foreign minister did not say that we told him the soldiers were alive but that he understood they were alive. He said we did not answer his request as we told him the issue depended on negotiations and that I was the only one authorized to give details on their status," Nasrallah said.
He refused to say whether the two Israeli soldiers were alive, saying he is not willing to give Israel "something for free."