The tunnel was dug under a house in Gaza located some 100 meters from the border with Egypt, according to Col. Hussein Abu Omar, a PA security official.
It was not clear how far into Egypt the tunnel reached, nor was it immediately apparent whether the tunnel was used to smuggle weapons, contraband or both.
No further information about the incident was available.
Israel Defense Forces killed a Hamas terrorist and wounded three others in an air strike in a car in the Zeitoun neighborhood in Gaza City over the weekend.
The dead terrorist was identified as Mahmoud Housh. The IDF said the hit was ordered to eliminate Hamas operatives involved in weapons production, but declined to provide further details.
Palestinian Authority sources said a second operative, identified as a member of the Islamic Jihad terror organization, was killed by the IDF in a separate incident. The IDF said it was checking into the report.
Earlier in the day IDF soldiers fired at three PA Arabs near the Karni border crossing with Gaza and confirmed hitting at least one, according to an army spokeswoman. Local sources said one of the three was killed.
IDF troops also fired at a group of terrorists who were spotted planting explosives nearby. In a separate incident, terrorists detonated an explosive device near an IDF armored vehicle operating in northern Gaza.
Friday night, IDF soldiers fired at two gunmen who approached the security fence in northern Gaza. Both terrorists were hit but their condition was unknown. Two anti-tank missiles were fired by terrorists at an army engineering vehicle operating in Gaza earlier Friday evening. No injuries were reported in either incident.