"I welcome the fact that the EU has also declared Hezbollah to be a terrorist organisation and I thank the leaders of its member states," Netanyahu said in a statement.
Hezbollah "has imposed terrorist rule on wide sections of Lebanon, has converted them into an Iranian protectorate and is stockpiling tens of thousands of rockets there.
"These have been placed in the heart of civilian populations and are designed to be fired at population centres in Israel," he said.
The European Union today added Hezbollah's military wing to its list of "terrorist organisations" despite Lebanon warning against such a move.
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The EU decision came after some of its 28 foreign ministers overcame reservations in some member states that such a move would further destabilise Lebanon where the militant group plays a major role.
To do so, ministers agreed that EU political and economic links with Lebanon would be maintained.
Israeli President Shimon Peres said the blacklisting of Hezbollah's armed wing was a significant step.
"I welcome the European Union's decision regarding Hezbollah, a significant and necessary step towards putting an end to the spread of terror across the globe," Peres said.
"Your decision sends a clear message to terror organisations, and the countries which harbour them, that their murderous actions will not be tolerated," he said in a separate statement.
"Finally, after years of deliberations, the claim that Hezbollah is a legitimate political party has rightfully failed. Now it is clear to the entire world that Hezbollah is a terrorist organisation", Livni said in a statement.
Israel and Hezbollah fought a deadly war in the summer of 2006.