* Targeted area is militants' last foothold at frontier
* Hezbollah-run media reports early progress in attack
* Refugees flee camps, Lebanese army enabling passage (Adds army patrols, Hezbollah and jihadists death tolls)
By Laila Bassam and Tom Perry
BEIRUT, July 21 (Reuters) - Lebanon's Hezbollah and the Syrian army launched an offensive on Friday to drive Islamist insurgents from their last foothold on the Syrian-Lebanese border, a pro-Damascus military commander said.
The operation targeted insurgents from the Nusra Front group in the mountainous outskirts of the Lebanese town of Arsal and areas near the Syrian town of Fleita, the commander said.
Media run by Hezbollah reported significant gains by its side in the early stage of the operation. It later said Hezbollah fighters had captured the Sahl al-Rahwa area, taking over a Nusra operations centre, after driving militants out.
At least 23 of the militants had been killed in the first day of fighting, a security source said, as well as five Hezbollah combatants.
The Lebanese army, which assumed a defensive position around the town of Arsal, raised its alert level and was carrying out strict security measures including patrols and guarding the entrances to the town. The army later stopped an attempt by militants to breach its defences, military sources said.
A Lebanese security source said refugees living in the area were fleeing towards Arsal and the Lebanese army was facilitating their passage with U.N. supervision.
U.N. refugee agency (UNHCR) spokeswoman Lisa Abou Khaled said only a small number of people had fled to Arsal so far.
"UNHCR has only received confirmation ... that two Syrian families have arrived in the town of Arsal from the outskirts."
Several thousand Syrian refugees occupy camps east of the town in an area known as Juroud Arsal, a barren mountainous zone between Syria and Lebanon that has served as a base for Islamic State militants and other jihadists and rebels fighting in Syria's six-year-old civil war.
Hezbollah's al-Manar TV said Nusra militants were under attack in Juroud Arsal and in areas near the Syrian town of Fleita. A military news outlet run by Hezbollah reported Syrian army air strikes on Nusra positions near Fleita.
Al-Manar broadcast footage showing an artillery gun being fired from the back of a truck flying the Hezbollah flag. Plumes of smoke were shown rising from the hills.
Hezbollah, a Shi'ite Muslim group backed by Iran, has played a critical part in previous campaigns against Sunni Muslim insurgents along the border, part of the much wider role it has played supporting President Bashar al-Assad in the Syrian war.
The Lebanese army is not taking part in the operation, according to the commander in the pro-Damascus military alliance and the Lebanese security source. The Lebanese source said the army had assumed a defensive position, was monitoring militant movements, and would fire if it came under attack.
The Lebanese National News Agency later reported that the army had fired on a group of militants trying to flee the fighting towards Arsal.
The Lebanese army, a recipient of U.S. and British military support, deployed reinforcements on the outskirts of Arsal in anticipation of the operation this week to prevent militants crossing into Lebanon.
Hezbollah's role in the Syrian war has been a major point of contention in Lebanon, drawing criticism from opponents including Prime Minister Saad al-Hariri. Hariri's Future Movement said on Thursday the anticipated Arsal battle was part of "the services" offered by Hezbollah to "the Syrian regime".
Hariri said on Tuesday the Lebanese army would carry out a carefully planned operation in the Juroud Arsal area, but there was no coordination between it and the Syrian army.
The Nusra Front was al Qaeda's official affiliate in the Syrian war until last year when it formally severed ties to al Qaeda and renamed itself. The group now spearheads the Tahrir al-Sham Islamist alliance.
In 2014, Arsal was the scene of one of the most serious spillovers of the Syrian war into Lebanon when jihadists briefly overran the town.
Negotiations failed to secure the militants' withdrawal from the Juroud Arsal area to other rebel-held parts of Syria.
Earlier this month, Hezbollah leader Sayyed Hassan Nasrallah said time was running out for Syrian militants along the border near Arsal to reach deals with Syrian authorities. He said it was "high time to end the threat of militant groups in Arsal". (Reporting by Laila Bassam/Tom Perry additional reporting by Lisa Barrington and John Davison; writing by Tom Perry; editing by Mark Heinrich)
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