Israeli troops backed by armor stormed across the border into southern Lebanon before dawn today and seized at least 16 people from two villages, usually reliable sources reported.

Twelve of those seized were released after several hours of questioning in Israel, the sources said, but at least four were still being held by Israel.

In Tel Aviv, an Israeli military spokesman flatly denied that such a raid had taken place, calling it "entirely a figment of the imagination." In the Past, Israeli officials frequently have refused to confirm publicly such activities.

Although there have been frequent reports from southern Lebanon - denied by Israel - of Israeli troop activitis in the area, there have been no reports for several months of the capture of large numbers of people. In 1974 and 1975, however, Israeli raiders frequently seized residents of southern Lebanon on the grounds that they had engaged in guerrilla activities against Israel.

It was believed by sources here that the villagers seized today were questioned on movements by Palestinian commandos in the area. Rightist Christian Lebanese forces, with Israeli backing, have battled Palestinian forces for control of southern Lebanon.

The reproted raid came shortly before Israel announced that an Israeli soldier had been killed two days ago near the tense Israeli-Lebanese border the first Israeli soldier to die there in two years.

The soldier was killed by a mortar shell as he worked on a road-construction project near the border, Israeli officials said. An artillery duel between Palestinians and Lebanese Christians was under way at the time, and it was not known whether the mortar had been aimed at Israel.

In today's raid, sources said, one battalion of Israelis, with four armored personnel carriers, invaded Yaroun, a village 500 yards from the border, whole another battalion went to Meiss Jebel, about six miles north of Yaroun.

Sources said the villagers taken captive included Ali Ammar, a journalLibyan newspaper in Beirut. Ammar was not among the 12 released later today, they said.

Yaroun is south of Bint Jbeil, a stronghold of Lebanon's leftist-Palestinian alliance, and Meiss Jebel is on the road leading from Bizt Jbeil to an area held by Israeli-backed rightist troops.

Refugees from southern Lebanon said, meanwhile, that Israeli rockets hit a Palestinian-held town near the border, killing several people.

In other Middle East developments:

An explosion at the entrance to the independent Beirut newspaper Al Anwar injured five employees and did considerable damage, the paper reported. There was no indication who was responsible.

Palestinian leader Yasser Arafat, who returned this week from talks in Moscow, was quoted in a Palestinian newspaper as saying that the Soviet Union would play an effective role in backing the Palestinian commando movement.

The official Soviet Communist Party newspaper Pravda accused President Carter of not taking strong enough measures to prevent Israel's establishment of a "colonial regime" in territories it seized in the 1967 war.