Several Egyptian militants were killed in an air strike in Sinai on Friday as they prepared to launch a rocket into Israel, security sources and witnesses said.
The source 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.
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 coordination 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.
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Earlier, Egypt's army said two explosions were heard at around 4:15 pm (1415 GMT) in the Al-Ojra area, three kilometres (around 1.8 miles) 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 Islamist president Mohamed Morsi was ousted on July 3 in a military-led coup.