"Those who try to arrest us, we will arrest them," he said. "Those who shoot at us, we will shoot at them. The hand raised against us, we will cut it off."
Hezbollah runs its own secure network of private land lines. Nasrallah claimed the network helped Hezbollah fight Israel's high-tech army in the summer of 2006.
Nasrallah said the network was "the most important part of the weapons of the resistance," and added Hezbollah had a duty to defend those weapons.
"I am not declaring war. I am declaring a decision of self-defense," he said. The government has "crossed all the red lines. We will not be lenient with anyone."
The Hezbollah leader's remarks came after many people in Beirut awoke to find their city brought to a halt by roadblocks of burning tires and bulldozed walls. Supporters of Hezbollah and its allies have blocked roads leading to the airport and other main streets, paralyzing much of the capital.
The Lebanese army was deployed in key roads dividing Beirut from the mainly Shia southern suburbs, according to the BBC. But troops were not moved into densely built-up, heavily populated neighborhoods nearby.
Witnesses and security officials, according to the Associated Press, say Shiite supporters of Hezbollah and Sunni backers of Lebanon's U.S.-backed government are clashing with automatic rifles and grenades.
Wednesday's violence occurred in mixed Shiite and Sunni neighborhoods. Reuters reported at least 10 people were wounded.
Lebanon also said Tuesday that it would dismiss the security chief of the country's only international airport because he was suspected of ties to Hezbollah and failed to deal with a secret camera allegedly set up to monitor the movement of aircraft and VIPs.
Nasrallah offered a way out of the latest crisis, saying the "illegitimate" government must revoke its decisions against Hezbollah.
"The decision is tantamount to a declaration of war ... on the resistance and its weapons in the interest of America and Israel," Nasrallah said.
U.N. Secretary General, Ban Ki-moon, urged both sides "to cease immediately these riots and to reopen all roads in the country," the BBC reported.
"We remain gravely concerned about the potential for further escalation of the situation," U.N. special envoy Terje Roed-Larsen said.
The violence appears to stem in part from tensions among Lebanese political rivals who have been locked in a 17-month power struggle for control of the government. It now could be degenerating into a wider and deadlier sectarian conflict, the AP reported.
The rivals have failed to agree on electing a president, leaving the country without a head of state since November.