Egypt is reportedly planning to create a 500m buffer zone along the border with the Gaza Strip to block the smuggling of weapons.
Residents living along the border with the Palestinian territory were told to evacuate their homes so that they can be demolished, local media reports.
Water-filled trenches will also be used to prevent the construction of tunnels.
Egyptian media accuses Gaza's Hamas administration of aiding militants in Sinai. Hamas denies the charge.
Last week, more than 30 Egyptian soldiers were killed in a militant bomb attack on an army post in Sinai.
After the bombing, Egyptian President Abdul Fattah al-Sisi passed a law authorising the military to protect state facilities - including power plants, main roads and bridges.
He also declared a three-month state of emergency in Sinai. Critics of the move said it allows the army to return to the streets and brings back military trials for civilians.
The planned buffer zone will reportedly stretch along the length of the 13km (8 mile) border.
Officials told the Associated Press news agency that the army had given residents 48 hours to leave their homes, but this ultimatum had been put on hold after protests.
Tunnels linking the Gaza Strip and Sinai have also played a vital role in the economy of the Palestinian territory, which has been struggling to cope with a blockade imposed by Israel and Egypt in 2007 as a measure against Hamas.