A huge cache of arms and ammunition was also recovered during the raid at the militants' den, the Egyptian Ministry of Interior said in a statement.
The terrorists had killed 16 policemen and injured 13 others in an attack carried out on October 20 in the same area, it said, adding that one foreign terrorist was also arrested by the police.
The group of terrorists was established in the Libyan city of Derna by an Egyptian terrorist who was killed in previous airstrikes. They had received training in handling heavy weapons and making explosives.
Meanwhile, the Egyptian army said it has killed three terrorists and arrested 74 suspects in the past few days in the country's restive North Sinai governorate.
Terror attacks, mainly targeting police and military personnel, increased after the ouster of former Islamist president Mohamed Morsi in 2013 by military following massive protests against his rule.
Hundreds of police and army personnel have been killed since then.
The military has launched security operations in North Sinai, arresting suspects and demolishing houses that belonged to terrorists, including those facilitating tunnels leading to the Gaza Strip.
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