The Egyptian military source told the Palestinian news agency, officials from both sides met at the Kerem Shalom border crossing Wednesday and made "remarkable progress." The source said Israeli and Egyptian officials have met at least six times in the past three days to discuss the issue.
An Egyptian official told the news agency Israel has indicated it understands the situation but is concerned about the weaponry being brought into the Sinai.
Amos Yadlin, former Israeli military intelligence chief, told Army Radio Israel should not be concerned about the deployment of Egyptian tanks in the Sinai as long as it continues to crack down on terror groups.
"Terrorism is fought with tanks," he said in the Wednesday interview. Yadlin said Israel has already approved an Egyptian request to deploy more soldiers than the number specified in the 1979 Camp David peace treaty.
Earlier this week Israel sent a message to Egypt through the United States asking it to remove its tanks from the Sinai. An Israeli security source told the Hebrew language daily Maariv Israel considers the entry of tanks a "blatant violation of the peace treaty."
An Egyptian military source told the Egyptian Independent the army has identified 120 terror suspects in the Sinai who were allegedly involved in killing Egyptian police.
The 1979 peace treaty between Israel and Egypt called for an Israeli withdrawal from the Sinai Peninsula it captured in the 1967 Six Day War and turning the area into a demilitarized zone.