Egyptian troops have killed seven suspected militants on Sunday during a raids on hideouts in two villages in northern Sinai, security officials said, the Associated Press reported.
These were the first reported casualties since Egypt launched a major offensive against militants after they killed 16 Egyptian soldiers near the border of Israel and the Gaza strip.
Authorities believe that the Islamic militant who carried out the attack are affiliated with the Army of Islam, a small radical Islamist group which has been blamed by Egypt for several attacks in past years.
According to the AFP, the United States and Egypt are trying to put together a new security assistance package to address the worsening situation. Egypt receives $1.5 billion a year in military assistance from the United States.
The offensive is considered an early test for new Egyptian president Mohammad Morsi.
Critics say Morsi risks being soft on jihadist groups because he is from the Muslim Brotherhood, a political Islamist movement that has ties to the Hamas government in Gaza and a history of hostile rhetoric towards Israel.
However, the Brotherhood renounced violence as a means to achieve political change in Egypt decades ago.