Army spokesperson Brigadier General Mohamed Samir said the armed smugglers opened fire on the soldiers who were patrolling the border, killing six of them.
The soldiers engaged with the smugglers in exchange of fire and killed and injured a number of them. The area is currently being combed by ground and air forces, he said in a statement.
Police and military personnel have been the target of militants since the January 2011 revolution that toppled the ex-president Hosni Mubarak.
Over 700 security personnel have been reported killed since then.
In 2014, about 22 soldiers were killed in an attack in el-Farafra. The Ansar Beit el-Maqdes, an IS affiliate militant group based in Sinai, claimed responsibility for the attack.
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