Egyptian troops on Tuesday killed two smugglers attempting to enter Israel.
The IDF spokesperson's office said a patrol identified the group along the border with Egypt and fired warning shots toward them.
The smugglers reportedly fled into Egypt along with Arab contacts from the Israeli side. It is unknown what, if any, contraband they were attempting to bring into Israel.
Egyptian security officials confirmed killing one Egyptian Bedouin and one Israeli Arab in a tersely worded official statement.
Since the fall of former Egyptian president Hosni Mubarak early last year, the Sinai Peninsula has become haven for arms and drug smugglers, terrorists, and illegal workers trying to cross into Israel.
Israel is building an electronic barrier along the 230-kilometer (150-mile) border with Egypt to keep terrorists and illegal immigrants out.
Last week, Israel indicted a Hamas terrorist from Gaza who was planning to stage the kidnapping of an Israeli soldier from Gaza, and to aid a squad of suicide bombers in reaching the Israeli city of Eilat.
Earlier this month, Egypt sentenced two Israeli Arabs and one Ukrainian man in Sinai to life in prison for arms smuggling.
In August 2011, terrorists staging from Gaza ambushed an Israeli civilian bus in a deadly attack that left 8 Israelis dead.
Before the border incident Tuesday, Israeli Prime Minister Benjamin Netanyahu visited the barrier and pledged to have it completed soon.