The United States and Egypt are trying to put together a new security assistance package to address the worsening situation on the Sinai Peninsula, The New York Times reported.
The Egyptian military has been bolstering its presence in the Sinai with tanks and helicopters after Sunday's unprecedented ambush on a border guard outpost near the borders of Gaza and Israel, which left 16 Egyptian soldiers dead.
The Islamic militants, who carried out the attack, are believed to be affiliated with the Army of Islam, a small radical Islamist group which Egypt has blamed for several attacks in past years.
Citing unnamed officials, the US newspaper said the US Department of Defense is discussing with Egyptians a series of options for sharing intelligence with Egypt's military and police in Sinai.
This intelligence includes intercepts of cellphone or radio conversations of militants and overhead imagery provided by both piloted aircraft, drones, and satellites, the report said.
"We continue to discuss ways of increasing and improving the Egyptians' situational awareness in the Sinai," the paper quotes a Pentagon official as saying.
According to The Times, the talks are taking place through military and intelligence channels as well as with the government of President Mohamed Morsi.
Secretary of States Hillary Clinton, who was traveling in Africa last week, spoke by telephone with new Egyptian Prime Minister Hesham Qandil to discuss assistance, the paper noted. The date of the conversation was not disclosed.
Egypt receives $1.5 billion a year in military assistance from the United States.