Federal Liberal frontbencher James Paterson said the presence of Hezbollah flags at a pro-Palestinian protest was "disturbing" as the home affairs minister warned of visa cancellations for anyone seeking to incite "discord" in Australia.
The rally in Melbourne formed part of a national day of action for Gaza, with thousands of people also taking to the streets in Sydney and other cities.
A small group with Hezbollah flags — some holding what appeared to be framed photographs of the Lebanese militant group's — joined the Melbourne event as speeches ended and people began to march.
Nasrallah was killed by an Israeli airstrike on Friday amid escalating tensions in the region.
Paterson said the presence of Hezbollah flags at the rally was "disturbing" given it is designated by Australia as a terrorist organisation and called for police to enforce the law.
Victoria Police said the display of terrorist symbols was a Commonwealth offence.
"[We] support the right to protest peacefully and had a visible presence at the protest to ensure public safety," it said in a statement.
"Appropriate referrals will be made to the Australian Federal Police as the lead agency concerning prohibited symbols."
Minister for Home Affairs Tony Burke said: "Any indication of support for a terrorist organisation is unequivocally condemned."
"It draws the immediate attention of our security agencies. There is a higher level of scrutiny if anyone is on a visa. I have made clear from day one that I will consider refusing and cancelling visas for anyone who seeks to incite discord in Australia."
Organisers of the rally told AAP the group was not affiliated with those running the demonstration.
Foreign Minister Penny Wong said the government condemns "any indication of support for a terrorist organisation" such as Hezbollah.
"It not only threatens national security but fuels fear and division in our communities," she wrote on X.
"All of us — including every political leader — must stand together to reject terrorism and extremism."
The group was comfortably outnumbered by peaceful protesters showing solidarity with Lebanese and Palestinian communities.
Hezbollah confirmed Nasrallah was killed by an Israeli strike in the Lebanese capital of Beirut on Friday, sharpening fears the conflict could widen into a regional war.
'A dark day for people in the Middle East'
Rallies in solidarity with Gaza have been held weekly in Melbourne for much of the past year.
"You stand with Lebanon, you stand with Palestine," Omar Hassan, from Victorian Socialists, told fellow protesters.
"I want to say that it is a dark day for the people of the Middle East, and it's a dark day here in Melbourne ... but there are reasons to be cheerful and optimistic and hopeful."
Some attendees stood under umbrellas with the colours of the Palestinian flag and the protest around the edge.
Darebin protester Margaret, who did not wish for her full name to be used, said she had attended many of the protests and was glad to come out despite the rain.
"I would have never imagined we'd still be doing this, but we have to, that's all we can do," she said.
'Continued retribution' will not bring peace to the Middle East
Wong said on Sunday that "continued retribution" in the Middle East and fears violence in Lebanon could escalate.
Nasrallah's killing comes two months after , the head of Hamas' political wing, while he was in Iran's capital, Tehran.
It also follows used by Hezbollah exploded simultaneously across Lebanon. The blasts killed at least 39 people, including some children, and wounded nearly 3,000 in an attack widely blamed on Israel, which has not commented directly on the attack.
"The continued retribution ... will not bring peace, and it will not bring security, which is why Australia and others, including the United States and the United Kingdom, have called for a ceasefire in Lebanon and diplomacy to try and resolve this," Wong told Sky News on Sunday.
"Because we have seen so many people, so many people die."
Wong reiterated her call for Australians to flee Lebanon as soon as they can and said she was concerned about escalating violence.
Opposition frontbencher Bridget McKenzie said the assassination was a step that "had to be done to show force" to prevent further escalation.
McKenzie was also critical of Wong's recent in which she repeated the federal government's call for an Israel-Palestinian two-state solution and called on the UN Security Council to set a "pathway" for such a deal.
"What Penny Wong's calling for on the floor of the UN is absolutely playing domestic politics with a very, very serious situation," she told ABC's Insiders.
"She's trashing our decades-long bipartisan approach to a negotiated two-state solution in the Middle East."
Hamas attacked Israel on October 7, killing 1200 people and taking more than 200 hostages, according to Israeli authorities.
The attack sparked an Israeli offensive in the Gaza Strip that has killed almost 42,000 Palestinians, according to local health officials.
In Lebanon, more than 1,000 people have been killed and 6,000 wounded as a result of Israeli attacks in the past two weeks, according to the country's health ministry. More than 200,000 are estimated to be displaced.
