Several Egyptian militants have been killed in an air strike in Sinai as they prepared to launch a rocket into Israel, security sources and witnesses say.
The origin of the strike was not immediately clear.
Some sources spoke of an Israeli air strike conducted from Israeli air space and others credited the Egyptian military.
Two senior Egyptian security officials, speaking on condition of anonymity, said an Israeli drone strike inside Egypt killed five suspected Islamic militants and destroyed a rocket launcher on Friday.
The officials said the Israeli attack was in co-operation with Egyptian authorities.
The Egyptian officials said that the drone had been flying over the site of the attack since Friday morning.
But Egypt's military denied any Israeli strike.
"There is no truth whatsoever to any Israeli strikes inside Egyptian territory and the claims that there is Egyptian and Israeli co-ordination on the matter is utterly baseless," military spokesman Colonel Ahmed Aly said in a statement.
He said the armed forces and expert teams were still combing the area where two explosions were heard.
State media said at least five members of a cell led by local Islamist militants were killed in the raid.
Earlier, Egypt's army said two explosions were heard at around 4:15pm in the al-Ojra area, three kilometres from the border with Israel.
"The armed forces are combing the area of the explosions to find out the cause," Colonel Aly said.
Witnesses said Egyptian military helicopters hovered above the site after the blasts.
Israel's military on Thursday ordered the cancellation of all flights in and out of the Red Sea resort of Eilat, which borders Egypt, due to what is said was a security threat.
Last month, Israel deployed a battery of its Iron Dome missile defence system near Eilat, which has been a target of attacks in the past.
In April the town was struck by rocket fire from the Sinai, and debris from a rocket that hit northern Eilat on July 4 was found days later.
Egypt's army is currently engaged in an offensive in Sinai to curtail a surge in violence since president Mohamed Morsi was ousted on July 3 in a military-led coup.
