Ban also expressed concern at the threats of open war against Israel by Hezbollah leader Hassan Nasrallah. Nasrallah accused Israel of trying to start a new war by assassinating a top Hezbollah commander and warned it would be a battle Israel would lose.
Israel has denied involvement in the February 12 car bombing in Damascus, Syria that killed Imad Mughniyeh.
The secretary-general's report focused on implementation of the UN cease-fire resolution that ended the 34-day Second Lebanon War between Israel and Hezbollah in August 2006. The resolution reiterates a call for the disarming of all militias and bans arms transfers to them.
"Reports of Hezbollah rearming are a cause of great concern, posing serious challenges to the sovereignty, stability and independence of Lebanon," Ban said.
He told the council he continues to believe that the disarmament of Hezbollah and other militias must be part of a Lebanese-led political process that would fully restore the government's authority throughout the country.
He expressed regret that the persistent deterioration of the political climate and the prolonged deadlock over the election of a new Lebanese president have made it impossible to deal with the disarmament issue.
In his last report to the council in late October, Ban alleged that Hezbollah had rearmed with new long-range rockets capable of hitting Tel Aviv and tripled its arsenal of C-802 land-to-sea missiles since the 2006 war. He also drew attention to alleged breaches of the arms embargo and the transfer of sophisticated weapons from Iran and Syria - both strong backers of Hezbollah - across the Lebanon-Syria border.
Syria disputed the claim and countered that the allegations of weapons smuggling are motivated by political rather than security considerations, Ban said, but Hezbollah's leaders have admitted on several occasions that their military capacity had been replenished after the war with Israel.
"I, therefore, remain concerned that this border remains vulnerable to such breaches, which would represent serious violations of the resolution and constitute a significant threat to the stability and security of Lebanon," he said.
"All member states in the region, in particular the Syrian Arab Republic and the Islamic Republic of Iran, have a key responsibility in this regard," the secretary-general said. "Such violations risk further destabilizing Lebanon and the whole region."
After the 2006 war, a beefed-up UN force was stationed in south Lebanon, south of the Litani River, partially to keep Hezbollah from smuggling weapons into the area.
In Monday's report, Ban said, Israel maintains that Hezbollah is significantly rebuilding its military presence inside the UN's area of operations, and on occasion has provided the UN with information.
But he said UN and Lebanese forces have found no evidence so far of new infrastructure though their operational activities are occasionally closely monitored by unarmed civilians.
Israel also contends that Hezbollah has continued to construct new facilities and carry out training north of the Litani River and in the Bekaa Valley, where the government of Lebanon has exclusive responsibility for security, Ban said.
Hezbollah has not challenged allegations regarding the development of military facilities north of the Litani River and has publicly announced that it will use its arsenal against Israel if provoked, he said.
Israel claims Hezbollah has also adapted its tactics to the UN presence south of the Litani River and can fire rockets at Israel, Ban said.
"In addition to information provided in previous reports, the government of Israel states that Hezbollah's arsenal includes some 10,000 long-range rockets, in addition to some 20,000 short-range rockets, deployed both north and south of the Litani River," the secretary-general said.
He said Hezbollah denies transferring weapons south of the Litani River in violation of the 2006 resolution.
Before the war, Israel estimates that Hezbollah had 13,000 rockets deployed. During the war, Hezbollah bombarded Israel with nearly 4,000 rockets. The rockets struck as far south as Hadera, 45 kilometers north of Tel Aviv.
Since the war, Nasrallah has boasted his group possesses an arsenal of rockets that can reach all of Israel, including the main metropolis of Tel Aviv.
Shortly after the war, he said the guerrillas had 33,000 rockets.
In the report, Ban also expressed concern that "Israeli air violations continue unabated without any regard for the levels of tension and anger that these actions trigger on the ground."
Ban reiterated his urgent call for Israel to provide detailed information on the cluster munitions it fired during the war, saying the information provided last month is of very limited value.
Ban also urged the parties to redouble their efforts to resolve the issue of abducted Israel Defense Forces soldiers Eldad Regev and Ehud Goldwasser, whose kidnapping sparked the war, as well as Lebanese prisoners detained in Israel.